Keurig Dr Pepper lands buy rating from UBS
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UBS upgraded Keurig Dr Pepper (NASDAQ:KDP) to a Buy rating from Neutral on Wednesday.
The firm noted that the beverage stock may look more attractive in relation to peers after earnings growth decelerates to narrow the valuation gap closer to historical averages. "With earnings set to inflect and an attractive entry point, we believe the risk/reward now skews to the upside," advised analyst Peter Grom.
Grom also pointed to Keurig Dr Pepperâs coffee segment, which he thinks could potentially underpin revenue expansion, while also benefiting from stronger brand partnerships overall.
"We expect KDP to exit '23 with an improved algorithm for US Coffee that should drive continued +MSD [mid-single digit] growth looking out to '24," he noted. UBS' detailed bottom-up analysis of the beverage segment suggested that household penetration/volume performance has stabilized, and a path for solid growth exists after layering in the potential for continued pricing as gaps vs. other at-home coffee categories have widened.
UBS assigned a price target of $42 to Keurig Dr Pepper (KDP), which is just above the 52-week high of $41.31 and 25% higher than the closing price from Tuesday.
Separately, the most recent Nielsen data on Keurig Dr Pepper (KDP) also came in strong, with 2-week sales up 8.0% year-over-year and 12-week sales up 11.3%, led by a strong sales performance for the Dr Pepper brand and positive price/mix across all key brands.
Shares of Keurig Dr Pepper (KDP) rose 1.31% in premarket trading to $33.47. The beverage stock is down 5.85% on a year-to-date basis.

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