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On Wednesday, Citi analysts, led by Filippo Falorni, increased their price target on Keurig Dr Pepper (NASDAQ:KDP) shares to $41.00, up from $40.00, while sustaining a Buy rating on the stock. Currently trading at $34.94, InvestingPro analysis suggests the stock is slightly overvalued, though analyst targets range from $32.10 to $42.00. The revision followed Keurig Dr Pepper’s strong fourth-quarter performance, which exceeded expectations in terms of Organic Sales Growth (OSG) and Earnings Per Share (EPS), particularly highlighted by the success in Refreshment Beverages.
Keurig Dr Pepper reported results that were robust, with U.S. Coffee performing better than anticipated and aligning with the Visible Alpha consensus. The company maintains impressive gross profit margins of 55.68% and achieved revenue growth of 3.62% over the last twelve months. Despite facing significant coffee inflation, the company has provided a 2025 guidance that aligns with its previously stated growth algorithm, projecting mid-single-digit percentage topline growth and high-single-digit percentage EPS growth in constant currency.
The analysts noted that Keurig Dr Pepper’s implied organic topline growth of low-single-digit percentage, excluding the approximate 3.5% contribution from Ghost, appears conservative. This assessment is based on the strong fourth-quarter growth of 6.2% and positive scanner data trends observed in the first quarter of 2025 to date.
Despite potential gross margin pressure from rising costs, particularly in coffee and aluminum, Keurig Dr Pepper is considering additional price hikes for its coffee products. The company’s confidence in achieving the projected high-single-digit percentage EPS growth is supported by strong sales trends and anticipated savings from productivity improvements, particularly in Selling, General, and Administrative (SG&A) expenses.
Citi concluded that Keurig Dr Pepper’s valuation, which stands at approximately 17.3 times the estimated P/E for the calendar year 2025, remains appealing. With a current P/E ratio of 21.08 and a market capitalization of $47.35 billion, the firm’s analysts continue to recommend a Buy rating for the beverage company’s stock. For deeper insights into KDP’s valuation metrics and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, Keurig Dr Pepper Inc. reported its fourth-quarter 2024 earnings, surpassing market expectations with an earnings per share (EPS) of $0.58, compared to the forecasted $0.57. The company also exceeded revenue projections, posting $4.07 billion against the anticipated $4.02 billion. This indicates a strong operational performance for the quarter. The company reported a 6.2% increase in net sales in constant currency and a 9% growth in operating income for the full year. Additionally, Keurig Dr Pepper has made strategic investments and acquisitions, such as the acquisition of Ghost, to enhance its growth prospects in the energy drink market. Looking forward, the company anticipates mid-single-digit net sales growth and high-single-digit EPS growth for 2025, despite potential headwinds like foreign exchange fluctuations and inflationary pressures. The company continues to focus on expanding its presence in the energy drink market and expects significant contributions from its recent acquisitions.
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