In the aftermath of the JDE Peet’s acquisition, Keurig Dr Pepper beat Wall Street revenue and earnings estimates in the second quarter despite pressure on its U.S. coffee business.
Net income attributable to common shareholders was $60 million, or four cents per diluted share, versus $547 million, or 40 cents per diluted share, in the year-previous quarter. Adjusted for one-time events, net income attributable to common shareholders increased 15.2% to $783 million as diluted EPS increased 16.3% to 57 cents.
A Zacks Investment Research analyst consensus estimate called for earnings per adjusted diluted share of 55 cents and revenues of $7.17 billion.
Net sales increased 75.6%, and on a constant currency basis, 74.6%, to $7.31 billion. With the contribution from the JDE Peet’s acquisition excluded, legacy KDP net sales advanced 7.3%, driven by favorable net price realization of 4.2% and volume/mix growth of 3.1%.
The results also provided an early look at KDP’s coffee operations following the April 1 completion of its acquisition of JDE Peet’s, a transaction that the company has said will support the formation of its planned standalone coffee business.
In the U.S. Coffee segment, net sales decreased 3.2% to $918 million versus the year-prior quarter as volume/mix declined 8.2%, including an unfavorable impact from a reporting shift of Peet’s K-Cup pods into the JDE Peet’s segment, which more than offset favorable net price realization of 5%. Operating income decreased 36.1% to $149 million, while adjusted operating income decreased 24.7% to $225 million.
As for JDE Peet’s, net sales were $2.8 billion. The JDE Peet’s acquisition closed on April 1, so the segment contribution was wholly incremental to Keurig Dr Pepper on a year-over-year basis. Operating loss was $62 million, including an unfavorable impact of items affecting comparability primarily due to acquisition and integration-related costs, while adjusted operating income was $414 million.
Operating income was $628 million versus $898 million in the year-before quarter, while adjusted operating income was $1.48 billion versus $1.03 billion.
In discussing guidance, KDP reaffirmed that it anticipates net sales of $25.9 billion to $26.4 billion in the current fiscal year, and constant currency adjusted diluted EPS growth in a low-double-digit range.
Keurig Dr Pepper CEO Tim Cofer said, “We delivered another strong quarter of results, with Q2 EPS exceeding our expectations. U.S. Refreshment Beverages generated double-digit top- and bottom-line growth, KDP International sequentially improved as planned, and our combined coffee platform delivered solid performance, with healthy JDE Peet’s results balanced against U.S. Coffee pressures. We also made meaningful progress on our integration and separation work, including capturing initial cost synergies, advancing key organizational readiness milestones and generating robust free cash flow to support balance sheet deleveraging. At the midpoint of the year, we remain on track to achieve our 2026 financial and transformation commitments while preparing for a successful separation in early 2027.”
