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Investing.com - Piper Sandler lowered its price target on Keurig Dr Pepper (NASDAQ:KDP) to $35.00 from $40.00 on Wednesday, while maintaining an Overweight rating on the beverage company’s stock. The stock, currently trading near its 52-week low of $26.58, appears undervalued according to InvestingPro Fair Value analysis.
The research firm cited concerns about KDP’s post-acquisition leverage following its JDEP acquisition, which Piper Sandler estimates will put the company’s pro-forma leverage at approximately 5.2x by the end of 2026, before falling to around 4.3x by the end of 2027. Despite these leverage concerns, InvestingPro data shows the company maintains impressive gross profit margins of 54.93% and offers a dividend yield of 3.41%.
Piper Sandler reduced its 2025 earnings per share estimate for KDP from $2.06 to $2.01 and its 2026 EPS estimate from $2.17 to $2.14. The firm also adjusted its valuation multiple from approximately 18.5x to 16.5x 2026 earnings to reflect the company’s upcoming leverage position.
Despite the price target reduction, Piper Sandler remains bullish on KDP, noting the company has solid top-line momentum in U.S. retail beverage channels, where it leads other soda makers. The firm also identified potential upside of approximately $20 million to its third-quarter 2025 Ghost brand estimate. This aligns with InvestingPro’s analysis, which reveals multiple positive indicators including consistent dividend growth and expected profitability this year. Discover 8 more exclusive ProTips and comprehensive analysis in the Pro Research Report.
The research note mentioned that Mexico continues to be a headwind for the company, while highlighting KDP’s expected free cash flow yield of approximately 9% that should help reduce leverage following the acquisition.
In other recent news, Keurig Dr Pepper has declared a regular quarterly cash dividend of $0.23 per share, scheduled for payment on October 10, 2025. The company has also announced plans to acquire JDE Peet’s in an all-cash transaction valued at approximately €15.7 billion. This acquisition will lead to a strategic split of its coffee assets from its North American refreshment beverage business into two independent, U.S.-listed companies. UBS has responded to the acquisition news by lowering its price target for Keurig Dr Pepper to $35.00, while maintaining a Buy rating. In contrast, HSBC has downgraded the company from Buy to Hold, reducing its price target to $30.00 due to concerns about increased leverage. TD Cowen, meanwhile, has reiterated its Hold rating with a price target of $36.00, noting the expected increase in exposure to the coffee segment until the company split is completed. These developments highlight significant strategic shifts for Keurig Dr Pepper, impacting investor perspectives and analyst ratings.
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