Keurig Dr Pepper's (NASDAQ:KDP) Q1 Sales Top Estimates

Adam Hejl /
2024/04/25 7:35 am EDT

Beverage company Keurig Dr Pepper (NASDAQ:KDP) reported Q1 CY2024 results topping analysts' expectations, with revenue up 3.4% year on year to $3.47 billion. It made a non-GAAP profit of $0.38 per share, improving from its profit of $0.34 per share in the same quarter last year.

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Keurig Dr Pepper (KDP) Q1 CY2024 Highlights:

  • Revenue: $3.47 billion vs analyst estimates of $3.41 billion (1.6% beat)
  • EPS (non-GAAP): $0.38 vs analyst estimates of $0.35 (10% beat)
  • KDP reaffirmed its 2024 guidance "for constant currency net sales growth in a mid-single-digit range and EPS (non-GAAP) growth in a high-single-digit range"
  • Gross Margin (GAAP): 55.9%, up from 52% in the same quarter last year
  • Free Cash Flow was -$73 million, down from $143 million in the previous quarter
  • Sales Volumes were down 0.3% year on year
  • Market Capitalization: $44.87 billion

Commenting on this final step in the CEO transition, which began in Fall 2023, Chairman and CEO Bob Gamgort stated, "It has been a privilege to help establish Keurig Dr Pepper into the formidable company it is today, and I look forward to supporting its future growth as Executive Chairman. As KDP enters its next phase, Tim and his leadership team are activating an exciting, evolved strategy that I am confident will extend our track record of success and continue to differentiate KDP within the beverage industry."

Born out of a 2018 merger between coffee company Keurig Green Mountain and beverage company Dr Pepper Snapple, Keurig Dr Pepper (NASDAQ:KDP) boasts a powerhouse portfolio of beverages.

Beverages and Alcohol

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Sales Growth

Keurig Dr Pepper is one of the larger consumer staples companies and benefits from a well-known brand, giving it customer mindshare and influence over purchasing decisions.

As you can see below, the company's annualized revenue growth rate of 7.8% over the last three years was decent for a consumer staples business.

Keurig Dr Pepper Total Revenue

This quarter, Keurig Dr Pepper reported decent year-on-year revenue growth of 3.4%, and its $3.47 billion in revenue topped Wall Street's estimates by 1.6%. Looking ahead, Wall Street expects sales to grow 3.7% over the next 12 months, an acceleration from this quarter.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Keurig Dr Pepper's quarterly sales volumes have, on average, stayed about the same over the last two years. This stability is normal because the quantity demanded for consumer staples products typically doesn't see much volatility.

Keurig Dr Pepper Year-On-Year Volume Growth

In Keurig Dr Pepper's Q1 2024, year on year sales volumes were flat. By the company's standards, this result was a meaningful deceleration from the 1% year-on-year increase it posted 12 months ago. We'll be watching Keurig Dr Pepper closely to see if it can reaccelerate demand for its products.

Key Takeaways from Keurig Dr Pepper's Q1 Results

It was good to see Keurig Dr Pepper beat analysts' revenue, gross margin, and EPS expectations this quarter. That the company maintained previous full year guidance for sales and EPS growth means the operating environment and demand trends remain consistent with what the company observed about three months ago. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 3.5% after reporting and currently trades at $33.49 per share.

Keurig Dr Pepper may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.