Deutsche Bank Downgrades Dr Pepper Snapple Group (DPS) to Hold; Valuation Call
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Deutsche Bank downgrades Dr Pepper Snapple Group (NYSE: DPS) from Buy to Hold
Deutsche analyst says, "DPS shares have rallied 153% since the lows in March, and now within 6% of our revised $32 price target (from $31), we downgrade to Hold. Our upgrade earlier this year was based on (1) improving earnings momentum and (2) mis-valuation of the company. We believe operational momentum remains solid, but DPS appears more fairly-valued against our DCF, peer multiples, and upside/downside scenarios. Pepsi (NYSE: PEP) bottling negotiations may yield incremental profitability, but visibility is low and we do not expect a "windfall."
"We continue to believe DPS has positive long-term earnings momentum, with CSD volume growth outpacing the industry based on better value-positioning, consumers shifting to flavors and geographic expansion...Commodity costs remain a tailwind in 2H09 and shareholders are benefitting from steady debt reduction...We raise 2010 EPS $0.05 ($2.13)..."
Dr Pepper Snapple Group, Inc. engages in owning, bottling, and distributing non-alcoholic beverages in the United States, Canada, Mexico, and the Caribbean.
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