Dr Pepper Snapple Group, Inc.’s (DPS) shares reached a new 52-week high of $71.50 on Nov 13.
Shares of the beverage giant have been rising sharply after it reported strong third-quarter 2014 results on Oct 23 and also increased its earnings outlook for the second time this year.
In fact, Dr Pepper had an impressive run year to date delivering strong profits in all the quarters. This was driven by pricing gains, productivity improvements and lower interest expense and taxes.
The share price of this Zacks Rank #2 (Buy) company has soared 51.5% year-to-date. Moreover, Dr Pepper has delivered positive earnings surprises for four quarters in a row.
Impressive Third-Quarter Results
Continuing the strong performance for the first half, Dr Pepper posted yet another solid quarterly result in the third quarter.
The company beat the Zacks Consensus Estimate for both earnings and revenues. Adjusted earnings of 98 cents per share increased 11% year over year attributable to higher revenues and margins. Revenues grew 3% to $1.58 billion backed by price increases and favorable segment, product and package mix. Gross margins grew 30 basis points (bps) while operating margin went up 70 bps.
Earnings Outlook Goes Up
Dr Pepper raised its earnings outlook-for the second time this year following better-than-expected year-to-date results. The company expects adjusted earnings to be in a range of $3.56 to $3.62, up from $3.43 to $3.51 expected previously. Better top line expectations coupled with cost of goods sold deflation and slightly lower tax rate led to the improved earnings outlook. Core earnings are now expected to grow 11% to 13% year over year.
Management also raised top line expectations to be driven by better CSD volumes. The company expects sales to be up approximately 1% year over year, at the higher end of prior expectation of flat to up approximately 1%.
Other Stocks to Consider
Other beverage stocks that have the same Zacks Rank as Dr Pepper are The Keurig Green Mountain, Inc (GMCR), True Drinks Holdings, Inc. (TRUU) and Monster Beverage Corporation (MNST).
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