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Dr Pepper Snapple Stock: Why Most Analysts Rate It a ‘Buy’

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Stock movement

On a YTD (year-to-date) basis, Dr Pepper Snapple (DPS) stock has fallen 5.5% to $87.12 as of October 20, 2016. The company is currently trading below its YTD average price of $92.25. The stock fell 4.3% on October 4, 2016, in reaction to an article by Reuters on the possible sale of Bai Brands. Bai Brands is one of the company’s key allied brands.

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Stock trend compared to peers

The stock prices of nonalcoholic beverage companies Coca-Cola (KO), PepsiCo (PEP), and Monster Beverage (MNST) have moved -1.1%, 7.2%, and 1.6%, respectively, on a YTD basis.

As of October 20, 2016, Dr Pepper Snapple has underperformed the S&P 500 Index, which has risen 6.4% YTD. The PowerShares Dynamic Food & Beverage ETF (PBJ) has 2.7% exposure to Dr Pepper Snapple.

Analyst recommendations

As of October 20, 2016, 16 of the 21 analysts covering Dr Pepper Snapple stock had a “hold” recommendation. Three had a “buy” recommendation, and two had a “sell.” As we saw in Parts 1 and 2 of this series, Dr Pepper Snapple has consistently surpassed analyst sales and earnings estimates in recent quarters. However, about 80.0% of the company’s overall volumes are exposed to the carbonated soft drinks category, which is under pressure due to alleged ill effects such as obesity. The company is increasing its exposure to noncarbonated beverages to capture growth opportunities in categories such as ready-to-drink teas and sports drinks.

As of October 20, 2016, the 12-month price target for Dr Pepper Snapple stock was $98.25, which reflects an upside potential of 12.8%.

For more updates on earnings, visit our Nonalcoholic Beverages page.

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