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What Drove Dr Pepper Snapple’s Sales Growth in 2Q16?

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Sales beat estimates

Dr Pepper Snapple (DPS), the third-largest soda maker in the US, generated sales of about $1.70 billion in 2Q16, exceeding the consensus analyst sales estimate of $1.68 billion. Dr Pepper Snapple has consistently exceeded analyst sales estimates in each quarter of 2014 and 2015 as well as in 1Q16. The company’s 2Q16 sales grew by 2.4% on a YoY (year-over-year) basis.

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Sales growth drivers

Dr Pepper Snapple’s sales growth in 2Q16 was driven by about 2% from favorable product and package mix, 1% from higher pricing, and by a 1% rise in sales volumes. However, the 2Q16 net sales growth was adversely impacted by currency headwinds of $26 million, which decreased net sales by 2%. The company’s 2Q16 net sales were also negatively affected by an unfavorable segment mix resulting from higher concentrate sales.

Notably, the iShares US Consumer Goods ETF (IYK) has 0.8% exposure to Dr Pepper Snapple.

Dr Pepper Snapple’s sales growth in 2Q16 was higher than those of Coca-Cola (KO) and PepsiCo (PEP). Coca-Cola’s 2Q16 revenue declined by 5.1% in 2Q16 due to forex and structural headwinds. PepsiCo’s revenue fell by 3.3% in 2Q16, mainly due to adverse foreign currency movements. Monster Beverage (MNST) is scheduled to report its 2Q16 earnings on August 4. Analysts expect the company’s 2Q16 sales to rise by 15.9%, driven by strong demand for energy drinks.

Guidance

In part one of this series, we mentioned that Dr Pepper Snapple raised its adjusted EPS (earnings per share) guidance for fiscal 2016. But the company continues to expect its net sales to grow by 2% in fiscal 2016, as indicated in the previous guidance. This sales growth estimate takes into account a 1% adverse impact of currency fluctuations.

Now let’s look at how Dr Pepper Snapple’s soda and non-soda volumes fared in 2Q16.

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