Keurig Dr Pepper Q2 Volume Growth Obscured By Margin Cut, Currency Headwind

Keurig Dr Pepper Inc. KDP shares are trading slightly lower on Thursday after the company reported second-quarter results.

Keurig registered second quarter adjusted earnings per share of 49 cents, which aligns with the analyst consensus estimate. Quarterly sales of $4.16 billion (up 6.1% year over year) beat the Street view of $4.13 billion.

Adjusted net income increased 10.5% to $673 million, while gross profit increased to $2.255 billion from $2.172 billion in the year-ago period.

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Adjusted gross margin contracted to 55% from 56.1% in the year-ago period.

On a constant currency basis, net sales advanced 7.2%, driven by volume/mix growth of 5.0% and favorable net price realization of 2.2%. The acquisition of GHOST contributed 4.0 percentage points to volume/mix growth.

Adjusted operating income increased 7.0% to $1.028 billion. Adjusted operating margin remained flat on a year-over-year basis to 24.7%.

Net sales for the second quarter in the U.S. Refreshment Beverages increased 10.5% to $2.7 billion, U.S. Coffee decreased 0.2% to $0.9 billion, and International decreased 1.8% to $0.6 billion.

“Though the back half will present new challenges, we are on track to deliver our 2025 outlook and are confident in the long-term value creation ahead,” CEO Tim Cofer stated.

Operating cash flow for the second quarter was $431 million, and free cash flow totaled $325 million.

Keurig exited the quarter with cash and equivalents worth $509 million,

Outlook

The beverage giant reaffirmed its fiscal 2025 guidance for constant currency net sales growth in a mid-single-digit range and Adjusted diluted EPS growth in a high-single-digit range.

At current rates, foreign currency translation is forecasted to approximate a one-half of one percentage point headwind to full year top and bottom-line growth.

Price Action: KDP shares are trading lower by 0.50% to $33.30 at last check Thursday.

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