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The Post-1Q17 Strain on Dr Pepper Snapple’s Stock

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DPS stock after the 1Q results

As of May 1, 2017, Dr Pepper Snapple’s (DPS) stock was trading at $90.88, which was 0.2% higher on a YTD (year-to-date) basis. But the stock had fallen 5.5% on April 26, the day the company announced its 1Q17 results.

As of May 1, the company’s stock price has continued to fall since its 1Q17 results. As discussed in the previous parts of this series, the company exceeded the analysts’ earnings estimate but missed the sales estimate for 1Q17.

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Stock movement of peers

As of May 1, the stock prices of Coca-Cola (KO), PepsiCo (PEP), and Monster Beverage (MNST) have risen 4.2%, 7.3%, and 0.5%, respectively, on a YTD basis. Aside from its nonalcoholic beverage peers, Dr Pepper Snapple has also underperformed the S&P 500 Index, which has risen 6.7% on a YTD basis.

Notably, Coca-Cola, PepsiCo, and Monster Beverage, and Dr Pepper Snapple together account for ~15.7% of the Consumer Staples Select Sector SPDR Fund (XLP).

Analyst recommendations

As of May 1, 16 out of 21 analysts (76%) had a consensus “hold” rating for Dr Pepper Snapple’s stock. Four analysts had a “buy” rating, and one analyst had a “sell” rating.

Dr Pepper Snapple delivered better growth in its adjusted EPS (earnings per share) in 1Q17, as compared to larger peers Coca-Cola and PepsiCo. However, the shift in consumer preference toward healthier beverages has been impacting the soda volumes of Dr Pepper Snapple and its peers.

The 12-month price for Dr Pepper Snapple stock is now $100.32, which reflects a potential upside of 10.4% as of May 1.

In the next and final part, we’ll examine the impact of Dr Pepper Snapple’s 1Q17 results on its valuation.

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