Keurig Dr Pepper beat Wall Street estimates for the second quarter despite a decline in single-serve brewer and K-Cup volume.
An analyst average estimate published by Yahoo Finance called for adjusted diluted earnings per share of 40 cents and revenues of $3.69 billion.
Net sales for the second quarter increased 6.6% to $3.79 billion versus $3.55 billion in the year-earlier quarter. On a constant currency basis, net sales gained 6.1%, reflecting net price realization of 8.2% slightly offset by lower volume/mix of 2.1% as compared to the year-before period.
Consumption of KDP-manufactured K-Cup Pods as tracked decreased 2.3% in the United States during the quarter, and KDP-manufactured dollar share was approximately 79%, the company asserted. Total at-home coffee category trends during the second quarter continued to reflect greater consumer mobility versus the prior year, KDP reported, although the company observed sequential improvement in category consumption toward second quarter’s end, it indicated, which continued into the third quarter.
Operating income increased 34.4% to $769 million while adjusted operating income advanced 4.4% to $873 million versus the 2022 quarter.
U.S. Coffee net sales decreased 5.7% to $970 million, reflecting net price realization of 1.6% and a volume/mix decline of 7.3%. Changes in mobility, with sequential improvement in category volume trends observable each month of the quarter, affected at-home coffee consumption, the company pointed out. Pod revenue declined 4.6% in the quarter year over year, driven by a shipment decline of 7.7% resulting from mobility-driven category softness, the exit of some lower-margin private label contracts and an unfavorable comparison in the previous year during which the KDP rebuilt trade inventory levels following supply chain constraints. On a trailing 12-month basis compared with the pre-pandemic 2019 second quarter, at-home pod shipments grew 16.9%, representing a mid-single digit compound annual growth rate, KPD maintained.
Keurig Brewer shipments totaled 9.9 million for the period representing an 11% decline year-over-year. Versus pre-pandemic levels in the 12 months ending June 30, 2019, brewer shipments grew 17.8%, representing a mid-single digit CAGR. Trade inventory adjustments, which the company stated that it believes are now mostly complete, and slower discretionary spending for small appliances, affected brewer second quarter shipments. Operating income slid 15.3% to $250 million and adjusted operating income fell 14.6% to $292 million, in the period a year past.
KPD chairman and CEO Bob Gamgort said, “Our second quarter results demonstrated the strength of KDP’s brand portfolio and our high-quality retail execution. We saw continued momentum in the U.S. Refreshment Beverages and International segments, as well as encouraging intra quarter developments in U.S. Coffee, where we expect a sequential recovery in revenue and a meaningful inflection in margins in the back half. On a consolidated basis, we continue to drive healthy growth while reinvesting in our business and are increasingly confident in our full year outlook, which now reflects even stronger underlying EPS results.”