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BofA reiterates Keurig Dr Pepper Inc. at buy, sees multiple drivers

EditorRachael Rajan
Published 27/10/2023, 19:36
Updated 27/10/2023, 19:36
© Reuters.

BofA analysts reiterated a Buy rating and $37 price target on Keurig Dr Pepper Inc. (NASDAQ:KDP) in a research note to clients on Friday.

The analysts told investors that their firm is optimistic about the stock and sees "multiple drivers" to the company's 2024 algorithm.

"KDP delivered solid 3Q sales, setting up achievable 4Q and FY24 targets in our view," the analysts wrote. "Management struck a more cautious tone around the pace of at-home coffee volume recovery, though that appears to be less of a hurdle to delivering high-single-digit FY24 EPS growth in line with KDP's long-term algorithm."

"While there is some skepticism related to coffee acceleration other factors within KDP's control do offer some reassurance on maintaining earnings power despite the shift in narrative," they added.

These factors include pricing and the impact on margin recovery, line-of-sight to efficiencies now that volume and price are normalizing, and still steady share/growth in U.S. refreshments.

"US Coffee margin expansion of +280bps in 3Q suggests these benefits are already underway. Private Label coffee exits will remain a 200-300bps drag to volume through 1H24 but we still see $1.90 of EPS within reach next year on the underlying strength in Refreshment Beverages and Coffee margin improvement alone," concluded the analysts.

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