Goldman Sachs Lowers PT On Dr Pepper Snapple

Goldman Sachs has published a research report on the Dr Pepper Snapple Group DPS after the company filed for an 8-K recently as the company expects to see inflation among its input costs. In the report, Goldman Sachs writes "We are lowering our 2011 EPS estimate to $2.90 from $3.02 to reflect higher commodity inflation and higher fuel prices, partially offset by higher pricing. We lower our 2012 EPS to $3.18 from $3.30 to reflect a lower 2011 EPS base. We retain our Neutral rating on DPS shares. (1) Fundamentals healthy, but commodity increases a headwind – We remain constructive on DPS's overall fundamentals looking into 2011, as volumes should continue to grow and the beverage pricing environment should be generally favorable. However, we believe share gains are likely slow on stepped-up focus by both KO and PEP on CSDs and the continued increase in commodities could remain a margin headwind near term. (2) Cost saves should support margin gains over time – Longer term,DPS's increased clarity on potential cost savings over the next few years is encouraging, as it should provide an earning cushion on higher input costs and brand investment, given stepped-up investment from competitors. (3) Valuation reasonable, but not compelling – DPS trades at 13.3X 2011E P/E (ex non-cash deferred revenues), near parity to the market, which is appropriate, given DPS's projected long-term EPS growth of 8%-9%." Goldman Sachs maintains its Neutral rating and has lowered the price target from $41 to $39. Dr Pepper Snapple Group closed yesterday at $35.67.