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Keurig Dr Pepper Inc. (KDP)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered healthy growth: net sales $3.64B (+4.8% reported; +6.4% constant currency) and Adjusted diluted EPS $0.42 (+10.5% YoY), with momentum from U.S. Refreshment Beverages (USRB) and disciplined cost control .
  • Guidance reaffirmed: FY25 constant-currency net sales growth mid-single digits and Adjusted EPS growth high-single digits; FX now a ~1 ppt headwind (prior 1–2 ppts) .
  • Segment divergence continued: USRB net sales +11.0% (share gains in CSDs, energy and sports hydration; initial GHOST contribution), while U.S. Coffee declined 3.7% on green coffee inflation and early pricing actions; International down 6.3% reported but +5.4% CC .
  • Catalysts: reaffirmed outlook despite tariff/FX headwinds, early energy platform traction (C4, GHOST, Bloom; energy share ~6.5%) and ongoing productivity/SG&A leverage; coffee pressure expected to ease 2H as pricing normalizes and productivity builds .

What Went Well and What Went Wrong

  • What Went Well

    • USRB outperformed: net sales +11.0% with +8.0% volume/mix and +3.0% price; market share gains across CSDs (Dr Pepper, Canada Dry, 7UP), energy and sports hydration; GHOST contributed 2.9 pts to consolidated volume/mix .
    • Energy platform ramping: smooth GHOST integration start, C4 momentum, Bloom scaling; KDP cited ~6.5% energy share and expects momentum to build as distribution transitions fully to KDP .
    • Cost discipline: SG&A leveraged 90 bps; Adjusted operating income +3.9% to $847M (23.3% margin) despite inflation, aided by productivity and overhead efficiencies .

  • What Went Wrong

    • U.S. Coffee softness: net sales −3.7% (−5.2% volume/mix, +1.5% price); Adjusted operating income −12.5% as green coffee inflation and timing of industry pricing weighed on results .
    • Margin pressure: consolidated gross margin contracted 170 bps YoY, with inflation and tough comps offsetting price/productivity; management expects improvement as year progresses .
    • International optics: reported net sales −6.3% (FX), though +5.4% CC; operating income −19.6% GAAP/−4.6% adjusted on FX and higher SG&A despite healthy beverage momentum in Canada/Mexico .

Financial Results

Overall results vs prior two quarters (oldest → newest):

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Billions)$3.89 $4.07 $3.64
GAAP Diluted EPS ($)$0.45 $(0.11) $0.38
Adjusted Diluted EPS ($)$0.51 $0.58 $0.42
Gross Margin % (Reported)55.0% 55.9% 54.6%
Gross Margin % (Adjusted)56.0% 56.3% 54.7%
Operating Margin % (Reported)23.2% 1.5% 22.0%
Operating Margin % (Adjusted)27.0% 27.7% 23.3%

Segment net sales ($USD Millions):

SegmentQ3 2024Q4 2024Q1 2025
U.S. Refreshment Beverages2,390 2,441 2,323
U.S. Coffee976 1,130 877
International525 499 435
Total3,891 4,070 3,635

Segment income from operations (reported, $USD Millions):

SegmentQ3 2024Q4 2024Q1 2025
U.S. Refreshment Beverages722 (176) 654
U.S. Coffee254 349 202
International157 126 90
Unallocated Corporate(231) (236) (145)
Total902 63 801

Top-line drivers and mix:

KPIQ3 2024Q4 2024Q1 2025
Net Sales Growth YoY (Reported)2.3% 5.2% 4.8%
Net Sales Growth YoY (CC)3.1% 6.2% 6.4%
Net Price Realization (pts)(0.4) +0.9 +2.8
Volume/Mix (pts)+3.5 +5.3 +3.6
FX Impact (pts)+0.8 to reach CC +1.0 to reach CC +1.6 to reach CC

Selected segment growth YoY (reported):

Segment Net Sales Growth (%)Q3 2024Q4 2024Q1 2025
U.S. Refreshment Beverages+5.3% +10.3% +11.0%
U.S. Coffee(3.6)% (2.4)% (3.7)%
International+0.4% +0.8% (6.3)% (reported) / +5.4% (CC)

Cash flow (Q1 2025):

MetricQ1 2025
Operating Cash Flow ($USD Millions)209
Free Cash Flow ($USD Millions)102

Non-GAAP adjustments (Q1 2025 key items): mark-to-market derivatives, intangibles amortization, inventory step-up, GHOST integration, productivity, legal matters; Adjusted EPS $0.42 vs GAAP $0.38 largely reflecting these items and a realized gain on sale of Vita Coco .

Guidance Changes

MetricPeriodPrevious Guidance (Feb 25, 2025)Current Guidance (Apr 24, 2025)Change
Net Sales Growth (CC)FY 2025Mid-single digits Mid-single digits Maintained
Adjusted Diluted EPS Growth (CC)FY 2025High-single digits High-single digits Maintained
FX ImpactFY 2025~1–2 ppt headwind ~1 ppt headwind Slightly improved
Interest ExpenseFY 2025$680–$700M (below-the-line assumption) $680–$700M (reiterated) Maintained
Effective Tax RateFY 2025~22–23% ~22–23% Maintained
Diluted Wtd Avg SharesFY 2025~1.37B ~1.37B Maintained

Note: Management reaffirmed FY25 outlook; CFO cited bias toward the high end of the net sales range and noted tariff impacts manageable with mitigations (pricing, productivity, sourcing), plus flexibility from Q1 overdelivery .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Energy platform (GHOST, C4, Bloom)Announced GHOST acquisition; energy momentum building; double-digit category, portfolio complementary Smooth GHOST distribution transition; energy share ~6.5%; expected ramp through 2025 Improving
U.S. Coffee pricing/elasticityPricing to address 2025 green coffee inflation; focus on preserving profit dollars, accept elasticity Early price actions weighed Q1 volume/mix; expect easing in 2H as industry pricing layers in and productivity builds Stabilizing later
Tariffs/macroWatching macro; on-algorithm 2025 plan with mitigations Tariff impact manageable within guidance; multiple countermeasures identified Manageable
Productivity/SG&A leverageHigh-end productivity and overhead discipline in 2024; operating leverage target 2025 SG&A leveraged 90 bps; continued focus on productivity to offset inflation Sustained
International momentumBroad-based growth; Mexico/Canada strength; reinvestment +5.4% CC sales; OI pressured by FX/SG&A; expect acceleration through 2025 Mixed (CC strong; FX drag)
R&D / Future CoffeeKeurig Alta and K‑Rounds progress (behind-the-scenes testing) Expanded in-home testing; planning for commercialization; continued focus on premium/cold Advancing

Management Commentary

  • “Our first quarter performance represented a strong start to the year. We delivered healthy top- and bottom-line growth… and reaffirmed our full year outlook” — CEO Tim Cofer .
  • “Q1 served as a good demonstration… our resilience was evident… we moved quickly to assess and react to trade policy changes… we are reaffirming our full year guidance” — CEO .
  • “Net price realization increased 2.8%… volume mix advanced 3.6%… gross margin contracted 170 bps vs prior year… SG&A leveraged 90 bps” — CFO Sudhanshu Priyadarshi .
  • “Anticipated tariff impacts in 2025 appear manageable relative to our guidance… mitigation steps include cost savings, pricing, mix, alternate sourcing” — CFO .
  • Board evolution: two new independent directors appointed (Mike Van de Ven, Lawson Whiting); Bob Gamgort transitioned to non-executive Chairman .

Q&A Highlights

  • Guidance resilience and tariffs: Management reaffirmed high-single-digit EPS growth (CC) despite tariffs and softer coffee; offsets include pricing, productivity, mix, alternate sourcing, and flexibility from Q1 overdelivery .
  • USRB sustainability: CSD innovation (Dr Pepper Blackberry nearly 1 pt share), energy growth, Electrolit expansion, and typical CSD pricing support continued momentum; potential late-year pricing if tariffs necessitate .
  • Coffee elasticity and affordability: Early pricing led to temporary volume/mix pressure; elasticity “manageable” so far; additional actions possible; focus on price-pack architecture and communicating at-home value .
  • Free cash flow and deleveraging: Q1 FCF $102M included a known one-time $225M GHOST distribution payment; company remains on track to restore structural conversion and prioritize deleveraging while funding investment/dividends .
  • GHOST cadence: Strong start; contribution expected to build as distribution ramps; KDP targeting energy double-digit share longer-term across complementary brands .

Estimates Context

  • S&P Global consensus for Q1 2025 EPS and revenue was unavailable via our estimates tool at the time of query; as a result, we cannot definitively score beats/misses vs consensus in this report. On the call, one analyst referenced ~+$0.04 upside versus consensus; management noted part of the upside reflected a realized gain on the sale of the Vita Coco stake and reiterated the full-year guide .

Key Takeaways for Investors

  • USRB remains the growth engine (net sales +11%) with broad-based brand momentum and an expanding energy/sports hydration platform; this underpins the reaffirmed FY25 outlook despite macro volatility .
  • Coffee pressure likely persists into Q2 given pricing phasing and green coffee inflation but should ease in 2H as industry pricing catches up and productivity benefits accrue; watch for sequential improvement .
  • Energy is a multi-year growth vector: early GHOST integration progress and portfolio breadth (C4, Bloom, Black Rifle) support share gains and incremental distribution—an important medium-term earnings driver .
  • Margin trajectory: reported gross margin compressed YoY, but management is leveraging SG&A and productivity to protect Adjusted margins; we expect operating leverage to improve as pricing/productivity build through the year .
  • FX/tariffs: headwinds are real but manageable within guidance; mitigation levers and Q1 cushion provide flexibility; monitor any additional trade policy shifts .
  • Cash priorities: underlying FCF is improving (excluding one-time items); deleveraging is prioritized while maintaining disciplined cap allocation (dividends, selective investment) .
  • Near-term trading lens: reaffirmed guide amid macro/tariff noise and early energy traction are supportive; watch coffee datapoints and scanner trends for confirmation of 2H inflection and energy distribution ramp cadence .

Appendix: Additional Data (Q1 2025 GAAP financial statements)

  • Key line items: net sales $3,635M; gross profit $1,985M; operating income $801M; net income $517M; diluted EPS $0.38 .
  • Balance sheet: cash & equivalents $653M; total assets $53,699M; total liabilities $29,252M; equity $24,447M .
  • LTM Adjusted EBITDA $4,638M; management leverage ratio 3.3x at 3/31/25 .