Keurig Dr Pepper beats on revenue, but its US coffee unit recovers more slowly

what happened

Keurig Dr Pepper lifted third-quarter net sales 71% to $7.34 billion, just ahead of Wall Street estimates, according to Market Talk. Most of the gain came from the acquisition of JDE Peet's, the owner of Peet's Coffee, while legacy beverage sales still grew at a high-single-digit pace.

CEO Tim Cofer said the US single-serve coffee segment was softer than the company expected, as inflation-weary consumers trade down to cheaper formats. Update reports adjusted earnings of 66 cents a share against a FactSet forecast of 62 cents, and says the stock fell about 5% to $35 after the open.

The company kept its full-year outlook, calling for adjusted earnings-per-share growth in the low double digits in constant currency and net sales of $25.9 billion to $26.4 billion.

why it matters

The key takeaway for markets is that price-sensitive shoppers are shifting toward cheaper coffee products, and the category is recovering more slowly than management hoped. J.P. Morgan, cited by Market Talk, also says it is too early to call a turning point in the US spirits market.

market impact

Keurig Dr Pepper shares: pressure from weak US single-serve coffee demand

• ▼Keurig Dr Pepper shares pressure down — weak US single-serve coffee demand lowers expectations for the category

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