Impact of 3Q17 results
Dr Pepper Snapple (DPS) stock fell 4.7% on October 25, 2017, in reaction to the company’s 3Q17 results. The third-largest soda drink maker in the United States missed analysts’ sales as well as earnings estimates. As of October 27, 2017, DPS stock has fallen 5.4% YTD (year-to-date) to $85.75.
Stock lags peers
Dr Pepper Snapple stock lags its peers in terms of YTD growth. As of October 27, 2017, the stock prices of nonalcoholic beverage companies Coca-Cola (KO), PepsiCo (PEP), and Monster Beverage (MNST) have risen 11.1%, 5.7%, and 28.0%, respectively, since the start of 2017.
Dr Pepper Snapple stock has also underperformed the S&P 500 Index, which has risen 15.3% YTD. The Consumer Staples Select Sector SPDR ETF (XLP) has risen 2.7% since the start of 2017. XLP has a 25.2% exposure to nonalcoholic and alcoholic beverage stocks.
Dr Pepper Snapple and other soda makers are under pressure since soda volumes are declining in key markets. According to Beverage-Digest, US soda beverage volumes fell for the 12th straight year in 2016. The persistent weakness in soda volumes reflects the aversion to sugary soda drinks and a preference for healthier choices such as bottled water and ready-to-drink teas.
In this series on Dr Pepper Snapple’s 3Q17 results, we’ll look in detail at the company’s sales, earnings, and margins. We’ll also look at volume growth of its beverage categories. Then we’ll assess the changes in the company’s valuation and analysts’ price targets in reaction to the 3Q17 results.
Let’s start by looking at the company’s 3Q17 earnings.