Dr Pepper Snapple Group Inc.'s (DPS) fourth-quarter 2014 adjusted earnings of 88 cents per share beat the Zacks Consensus Estimate of 87 cents by a penny. However, earnings slipped 9% year over year mainly due to lower margin.
During the quarter, Dr Pepper's net sales rose 3.15% from the year-ago figure to $1.50 billion on the back of improving sales volumes, price increases and favorable product/package mix. Sales volume increased 2% year over year backed by gains in all the segments. Net sales beat the Zacks Consensus Estimate of $1.46 billion by 2.7%.
Adjusted gross profit went up 1.7% to $899.0 million due to higher revenues. Adjusted operating income, however, slipped 9.9% year over year to $291 million due to higher selling, general and administrative expenses.
The effective tax rate was 34.5%, lower than 34.8% in the prior-year quarter.
Volumes in Detail
Dr Pepper's sales volume is measured in two ways: 1) sales volume, and 2) bottler case sales (BCS) volume. Sales volume represents concentrates and finished beverages sold to bottlers, retailers and distributors. BCS includes the sale of packaged beverages by the company and its bottlers to retailers and independent distributors.
Sales volume, as discussed earlier, increased 2% backed by 2% volume gain in Beverage concentrates, 4% gain in Packaged Beverages and 1% gain in the Latin American segment.
In the quarter, BCS volume went up 2% as Carbonated Soft Drinks (CSDs) and non-carbonated beverages (NCB) volume gained 17 % and 1%, respectively.
Overall, volumes of the Core 4 brands (Canada Dry, A&W, Sunkist soda and 7UP), including TEN versions, increased 2% driven by strong performance of Canada Dry. High single-digit volume growth in Canada Dry was partially offset by low single-digit decline in 7UP. A&W and Sunkist soda remained flat.
Segment Details
Beverage Concentrates: Dr Pepper's net sales from Beverage Concentrates slipped 2% year over year as higher sales volumes and concentrate price increases earlier in the year were more than offset by higher fourth-quarter trade accrual. Segment operating profit declined 7% year over year due to increased marketing investments of $8 million and rise in certain operating costs.
Packaged Beverages: In the Packaged Beverages segment, net sales rose 4% driven by higher volume. Segment operating profit surged 50% year over year backed by tailwinds from higher productivity, favorable input cost and lower people costs.
Latin America Beverages: Dr Pepper's net sales from Latin America Beverages increased 17% on a currency neutral basis driven largely by higher pricing associated with the pass-through of the sugar tax in Mexico, favorable product and package mix and increased sales volumes. Segment operating profit increased 73% (excluding currency) backed by productivity gains.
Fiscal Results
Fiscal 2014 adjusted earnings of $3.65 per share were in line with the Zacks Consensus Estimate for earnings and increased 14% from the year-ago results.
Net sales rose 2.1% year over year to $6.12 billion and beat the Zacks Consensus Estimate of $6.08 billion by 1%.
2015 Outlook
The company expects fiscal 2015 earnings within the range of $3.80 to $3.88. This represents an upside from the 2014 levels.
The company expects net sales to be up 1% from the year-ago level. Management expects currency to hurt sales by 1%.
The company expects lower packaging and commodity costs to reduce the cost of goods sold (COGS) by 1% in 2015.
Dr Pepper has a Zacks Rank #2 (Buy). Other stock worth considering in the consumer staples sector include Boston Beer Inc. (SAM), Sanderson Farms Inc. (SAFM) and Tyson Foods Inc. (TSN). While Boston Beer sports a Zacks Rank #1 (Strong Buy), Sanderson Farms and Tyson Foods carry a Zacks Rank #2.
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