Keurig Dr Pepper (KDP)

Beverage company Keurig Dr Pepper (NASDAQ:KDP) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 10.5% year on year to $4.50 billion. Its non-GAAP profit of $0.60 per share was 1.9% above analysts’ consensus estimates.

Company Overview

Born out of a 2018 merger between Keurig Green Mountain and Dr Pepper Snapple, Keurig Dr Pepper (NASDAQ:KDP) is a consumer staples powerhouse boasting a portfolio of beverages including sodas, coffees, and juices.

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 rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. 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.

Competitors that offer beverages and snacks include Coca-Cola (NYSE:KO), PepsiCo (NASDAQ:PEP), and Monster Beverage (NASDAQ:MNST).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $16.6 billion in revenue over the past 12 months, Keurig Dr Pepper is larger than most consumer staples companies and benefits from economies of scale, enabling it to gain more leverage on its fixed costs than smaller competitors. Its size also gives it negotiating leverage with distributors, allowing its products to reach more shelves. However, its scale is a double-edged sword because there are only a finite number of major retail partners, placing a ceiling on its growth. To accelerate sales, Keurig Dr Pepper likely needs to optimize its pricing or lean into new products and international expansion.

As you can see below, Keurig Dr Pepper’s 5.7% annualized revenue growth over the last three years was mediocre, but to its credit, consumers bought more of its products.

This quarter, Keurig Dr Pepper reported year-on-year revenue growth of 10.5%, and its $4.50 billion of revenue exceeded Wall Street’s estimates by 3.1%.

Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months, similar to its three-year rate. This projection is underwhelming and implies its products will face some demand challenges.

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 average quarterly volume growth was a robust 4.4% over the last two years. This is good because meaningful volume growth is hard to come by in the stable consumer staples sector.

In Keurig Dr Pepper’s Q4 2025, sales volumes jumped 4.8% year on year. This result was in line with its historical levels.

Keurig Dr Pepper has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 54.9% gross margin over the last two years. That means Keurig Dr Pepper only paid its suppliers $45.15 for every $100 in revenue.

This quarter, Keurig Dr Pepper’s gross profit margin was 53.8%, down 2.2 percentage points year on year. Keurig Dr Pepper’s full-year margin has also been trending down over the past 12 months, decreasing by 1.4 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is a key profitability metric because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.

Keurig Dr Pepper has been an efficient company over the last two years. It was one of the more profitable businesses in the consumer staples sector, boasting an average operating margin of 19.3%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Keurig Dr Pepper’s operating margin rose by 4.7 percentage points over the last year, as its sales growth gave it operating leverage.

In Q4, Keurig Dr Pepper generated an operating margin profit margin of 19.6%, up 18 percentage points year on year. The increase was solid, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, and administrative overhead grew slower than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Keurig Dr Pepper’s decent 6.9% annual EPS growth over the last three years aligns with its revenue performance. This tells us its incremental sales were profitable.

In Q4, Keurig Dr Pepper reported adjusted EPS of $0.60, up from $0.58 in the same quarter last year. This print beat analysts’ estimates by 1.9%. Over the next 12 months, Wall Street expects Keurig Dr Pepper’s full-year EPS of $2.05 to grow 5.2%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Keurig Dr Pepper has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.9% over the last two years, quite impressive for a consumer staples business.

Taking a step back, we can see that Keurig Dr Pepper’s margin dropped by 1.7 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

Keurig Dr Pepper’s free cash flow clocked in at $550 million in Q4, equivalent to a 12.2% margin. The company’s cash profitability regressed as it was 4.7 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Keurig Dr Pepper historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.9%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

We enjoyed seeing Keurig Dr Pepper beat analysts’ revenue and EPS expectations this quarter. Overall, this print had some key positives. The stock traded up 2% to $30.25 immediately following the results.

Updated: February 24, 2026 at 7:09 AM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Keurig Dr Pepper.

There are some bright spots in Keurig Dr Pepper’s fundamentals, but its business quality ultimately falls short. Although its revenue growth was a little slower over the last three years and analysts expect growth to slow over the next 12 months, its expanding operating margin shows the business has become more efficient. Tread carefully with this one, however, as its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Keurig Dr Pepper’s P/E ratio based on the next 12 months is 13.8x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $34.43 on the company (compared to the current share price of $30.25).