TSX runs higher on rate cut expectations
Investing.com - UBS lowered its price target on Keurig Dr Pepper (NASDAQ:KDP) to $35.00 from $40.00 on Wednesday, while maintaining a Buy rating following the company’s announced plans to acquire JDE Peet’s. According to InvestingPro data, analyst targets for KDP currently range from $30 to $42, with the stock trading at 25.8x earnings.
The stock has fallen nearly 18% in the past two days after Keurig Dr Pepper revealed its intention to acquire JDE Peet’s and subsequently split the coffee assets from its North American refreshment beverage business. InvestingPro analysis indicates the stock is now trading near its 52-week low, with technical indicators suggesting oversold conditions.
UBS noted that the transaction has created uncertainty in the company’s catalyst path at a time when investors had become optimistic about increased top and bottom line visibility, while also adding execution risk and pushing leverage above 5x post-deal.
Despite these concerns, UBS suggested the market reaction appears excessive, stating that the strategic rationale for separating the businesses makes sense and that strong year-one accretion of the transaction (estimated at 10%+) and potential sum-of-the-parts upside are being overlooked.
UBS expects KDP shares to remain range-bound in the near term as strong fundamental performance will likely be overshadowed by the transaction, but believes the enterprise is "meaningfully undervalued" at current levels with their analysis pointing to more than 20% potential upside.
In other recent news, Keurig Dr Pepper has announced a significant development with its decision to acquire JDE Peet’s in an all-cash transaction valued at approximately €15.7 billion. This acquisition will lead to the company splitting into two independent, U.S.-listed companies through a tax-free spinoff, expected to close in 2026. The move has prompted varied reactions from analysts. UBS has maintained its Buy rating with a $40.00 price target, while TD Cowen reiterated a Hold rating with a $36.00 price target, noting the increased exposure to the coffee segment for shareholders. However, HSBC downgraded Keurig Dr Pepper from Buy to Hold, reducing its price target to $30.00 due to concerns about the company’s leverage following the acquisition. RBC Capital, on the other hand, maintained an Outperform rating with a $42.00 price target despite the stock’s negative reaction to the announcement. Additionally, Moody’s has placed Keurig Dr Pepper’s ratings under review for a potential downgrade, citing the acquisition and planned company split as factors. These developments are shaping the current landscape for Keurig Dr Pepper and its investors.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.