Keurig Dr Pepper (KDP): Analysts Weigh In After Investor Day

October 4, 2021 7:31 AM EDT
Get Alerts KDP Hot Sheet
Price: $35.50 +3.80%

Rating Summary:
    11 Buy, 6 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 16 | Down: 18 | New: 17
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Shares of Keurig Dr Pepper (NASDAQ: KDP) fell nearly 3% on Friday as investors responded to a weaker-than-expected 2022 guidance.

The company held its Analyst Day on Friday and presented a long-term outlook based on +MSD topline and +HSD EPS growth, as well as reiterated its 2021 guidance.

UBS analyst Sean King believes the Buy-rated KDP stock offers “compelling valuation.” King has a $41.00 per share price target.

“We acknowledge investor concerns over the preliminary FY22 EPS guide of +MSD but we see this as prudent in the current inflationary environment impacting all of CPG. We expect KDP to deliver at or above +MSD EPS growth in FY22 on the back of share repurchases. We also argue that KDP’s unique operating model should prove more insulated than peers from these pressures. KDP expects to generate $4B in discretionary cash over '22-24 which translates to ~$20B in M&A capacity targeted to fill portfolio whitespaces, drive DSD scale and/or expand capabilities. We highlight the co’s track record of integrating and accelerating brands that address emerging consumer needs. KDP’s board also authorized a $4B share repo program over the '22-25 period to be implemented opportunistically which should be additive to the EPS growth outlook for '22+,” King said in a note sent to clients.

His colleague at Morgan Stanley, analyst Dara Mohsenian, is less bullish on KDP. Mohsenian rates the stock at Equal-weight with a $36.00 per share price target.

The analyst outlined key takeaways from the Analyst Day: 1) Topline Growth; Good and Bad News, 2) KDP reiterated that heritage Keurig it is still on track for an estimated at least 2M household additions in CY21, and 3) KDP also expressed confidence in continued heritage Dr. Pepper growth prospects.

“Our review here of KDP’s analyst day meeting will have mixed messaging, with a number of positives, as well as negatives, and caveats even within these points, both in terms of takeaways from the meeting and in regards to the stock. This leaves us at Equal-weight, but more positively inclined here,” Mohsenian commented in a client note.

Shares of Keurig Dr Pepper are up half a percent in pre-open Monday.

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