Dr Pepper Snapple Reports 16 Percent Earnings Increase In Q3

By Sam Lewis

Beverage company fails to meet revenue expectations as carbonated beverage market shrinks

Dr Pepper Snapple Group (DPS), the makers of 7UP, Sunkist, Hawaiian Punch, its namesake brands, and many other well-known beverages, released its third-quarter earnings report on Wednesday, Oct 23. The company saw a rise in net income, but missed revenue expectations, in part, due to a decreasing demand for carbonated drinks.

The company reported net income of $207 million, or $1.10 per share for the third-quarter. That’s a 16 percent increase over 2012’s $179 million, or 84 cents per share. When one-time items are removed, the company’s earnings totaled 88 cents per share. Wall Street analysts were forecasting earnings of 83 cents per share. The company is reporting $1.54 billion in revenue for 2013’s third-quarter, which barely beat 2012’s $1.53 billion mark. Analysts, though, expected $1.56 billion.

DPS also reaffirmed its year-end earnings guidance range of $3.04 to $3.12 per share, falling in line with analyst forecasts of $3.07 per share. Despite maintaining its earnings expectations, the company now believes revenue will be flat compared to its prior guidance. The implication is that revenue will come in at $6 billion for the year, opposed to the $6.07 billion expectation. “We continue to operate in an extremely challenging environment, with significant pressures in the CSD (carbonated soft drinks) category now impacting both regular and diet products. Against this backdrop, our teams remained committed to executing our strategy and we continued to gain volume share while holding value share in the CSD category,” president and CEO Larry Young said.

To combat the current decrease in demand for carbonated drinks, DPS is spending $30 million this year on the launch of five new mid-calorie beverages. This follows the 2012 launch of Dr Pepper Ten. Although Young is confident the company will meet profit goals for 2013, there is no denying that consumers are moving away from sugary soft drink options. Even the diet soda market is beginning to feel the effects of this trend. Launching mid-calorie drinks with natural ingredients may help DPS boost its sales. In addition, DPS could take a note and follow what Coca-Cola is doing; adapting new products to the changing needs of beverage consumers.