Keurig Dr. Pepper stock downgraded by Goldman Sachs over margin risks

Yahoo Finance Live investigates soft drink maker Keurig Dr. Pepper following a downgrade from Goldman Sachs analysts.
video transcript
RACHELLE AKUFFO: It's time for triple play, the three stocks we've been tracking over the last 30 minutes of trading. We have Keurig, Dr. Pepper, Domino's and General Motors. So we start with my choice which is Keurig Dr. Pepper, ticker symbol KDP. Now, shares of the beverage maker are under pressure this afternoon, having fallen about 3% there and falling this afternoon after Goldman Sachs downgraded its rating from "buy" to "neutral".
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Well, as a reason for caution, Bonnie Herzog and her team at Goldman cited increased margin risk as commodity inflation, particularly related to coffee, remains high for KDP relative to its peers, based on Goldman's updated commodity tracker . As such, they have also slightly lowered the full-year 2022 and 2023 estimates, making them below consensus.
In addition, however, you now have additional headwinds for KDP, including the beginning normalization of brewery household penetration. They have pod attach rates that moderate. And then, of course, the growth market for the packaged beverage business also slows down and market share gains also slow down.
But not all bad news. Goldman also said that despite the challenging environment, KDP is still performing well and also has strong underlying momentum in its coffee and packaged beverages businesses. They also highlighted ongoing initiatives to expand and improve distribution capabilities. So clearly not a bad day for KDP at this point, but obviously that caution is really weighing on the stock there, like I said, it's down about 3% today, Seana.
SEANA SMITH: Yes, higher commodity prices are obviously an issue here for Keurig Dr. Pepper, also a problem for many of their peers out there. However, it's interesting that this call is out now because the company has actually weathered the uptrend we've been seeing in coffee prices relatively well.
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Looking at the one-year chart, the stock is still in the green. Yes, it's getting hit today because of that call from Goldman Sachs, but over the past year you should still be covering about 6%. So we'll see how high coffee prices could potentially go and when that's obviously an issue for Keurig Dr. Pepper would be.
KDP
-3.51%

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