Dr. Pepper Misses Their Latest Quarterly Projections

Dr. Pepper is a company that as many of us know, produces soda and other beverages for our consumption. Some of their main competitors are the obvious choices of Pepsi and Coca Cola. The company recently came out with their numbers are they were a miss, causing the stock price to fall. Of course when a company reports less than desired numbers, peoples instant reaction is to sell the stock. Conversely, if the stock beats, people pile into the equity. It is important to look at all the company’s numbers to understand if this was just a blip on the radar or an indication of a larger issue.

Published over a year ago
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Reviewed by Vlad Skutelnik

The company reported a three percent fall in net profit for the first quarter and this was due to costs of acquiring Bai Brands. If you take a look at the cost of marketing, this was due to absorbing the cost of their Super Bowl advertisements. Volume did increase one percent and the company reported full year earnings per share of $4.56 to $4.66, which is around what the street believes. When these numbers hit, you need to understand that the cost of marketing was up due to a once a year expense and the acquisition may have cost a little more, but that is for the better of the company long term. Be sure to understand that those shouldn’t be felt going forward.

Looking at the stock chart on the monthly time frame, you can see that price has done nothing but increase, providing excellent returns for investors. However, you have to take into account we’ve been in a long sustained bull run and that certainly can’t continue on forever. Realize that there will be a market pull back at some point you don’t want to be invested in a company that is unable to handle a market pull back.

How important is Dr Pepper's Liquidity

Dr Pepper financial leverage refers to using borrowed capital as a funding source to finance Dr Pepper Snapple ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Dr Pepper financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Dr Pepper's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Dr Pepper's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Dr Pepper's total debt and its cash.

Going after DPS Financials

Some of the more well known risks to keep in mind is that push for healthier food options, which is negative pressure against the soft drink industry. People will always purchase soda, but this will reduce sales if the company is unable to market and sell effectively. Secondly, the competition in the soft drink industry is fierce and shelf space is at a premium. Dr. Pepper will need to maintain their market share and product quality if they wish to hold on to their current edge and grow.

There are many players in this market space and it can certainly be difficult to decide. Be sure to take a good long look at your options and compare the many different companies to see which one is providing you with the best value. If you get stuck in your research, reach out to an investing professional as they should be able to help point you in the right direction.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Nathan Young do not own shares of Dr Pepper Snapple. Please refer to our Terms of Use for any information regarding our disclosure principles.

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