Dr. Pepper Snapple Group Inc. (DPS) is up more than 100% in the last four months as the company expands its margins and pays down debt.
Company Description
Dr. Pepper Snapple Group Inc. owns, bottles and distributes beverages in the United States, Canada, Mexico and the Caribbean. The group was spun off from Cadbury in 2008 and has a market cap of $6.81 billion.
Recession or not, consumers love sugary beverages. So in spite of the weak consumer environment pervading the economy, Dr. Pepper Snapple Group reported strong second-quarter earnings on Aug 14 that were ahead of expectations.
Second-Quarter Results
Sales were down a bit from last year to $1.5 billion, but earnings came in 12 cents ahead of the Zacks Consensus Estimate at 62 cents per share.
The company noted that a few key elements helped its results, including gross margins increasing to 59.8% from 55.1% last year and operating margins growing to 20.1% from 17.4%.
Paying Down Debt
Dr. Pepper Snapple also added that it plans to pay $475 million in debt in 2009, a $75 million increase from previous estimates.
Estimates
Estimates have advanced since word of the good quarter, with the current-year estimate adding 19 cents and climbing to $1.96 per share.
Based upon this earnings projection, this stock has a P/E multiple of 14X, a discount to the overall market.
The Chart
Shares of DPS have been on fire since bottoming out below $12 in early March, having since topped the $27 mark. Take a look below.
