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Keurig Dr Pepper Inc. (KDP)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered double-digit net sales growth to $4.31B (+10.7% reported; +10.6% constant currency), with strength in U.S. Refreshment Beverages and continued improvement in U.S. Coffee; adjusted diluted EPS was $0.54 (+5.9% YoY) and GAAP diluted EPS was $0.49 (+8.9% YoY) .
  • Management raised FY2025 constant currency net sales guidance to high-single-digit growth (from mid-single-digit) and reaffirmed high-single-digit adjusted EPS growth; FX is expected to be a ~0.5 pt headwind to full-year top and bottom line .
  • Segment highlights: U.S. Refreshment Beverages net sales +14.4% to $2.73B (GHOST contributed 7.2 pts); U.S. Coffee +1.5% to $0.99B (price +5.5%, volume/mix −4.0%); International +10.5% to $0.58B .
  • Free cash flow was $528M in Q3 and $955M YTD; management leverage ratio was 3.2x at 9/30/25 (LTM adjusted EBITDA $4.79B) .
  • Street consensus data from S&P Global for Q3 2025 EPS/revenue was unavailable at time of retrieval; estimate comparisons are not presented (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • U.S. Refreshment Beverages momentum: net sales +14.4% to $2.73B, driven by volume/mix +11.2% and price +3.2%; adjusted operating margin 29.8% and adjusted operating income +10.0% YoY .
  • Execution and innovation: CEO highlighted “robust growth in U.S. Refreshment Beverages and encouraging sequential progress in U.S. Coffee,” citing “strong innovation and in-market execution” and market share gains in CSDs, energy, sports hydration .
  • Cash generation and leverage: Q3 operating cash flow $639M, FCF $528M; LTM adjusted EBITDA $4.79B; management leverage ratio at 3.2x, supporting balance sheet strength amid transformational plans .

What Went Wrong

  • Margin compression vs prior year on a reported basis: consolidated reported operating margin 23.1% in Q3 2025 vs 23.2% in Q3 2024; adjusted operating margin 25.3% vs 27.0% (prior-year adjusted) .
  • U.S. Coffee volume pressure: net price realization +5.5% offset by volume/mix −4.0%; GAAP operating income −6.7% YoY; brewers shipments declined amid tighter retailer inventory and consumer adjustment to pricing .
  • International adjusted operating income −4.3% YoY despite net sales growth, reflecting inflationary pressures outweighing productivity savings .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Billions)$3.891 $4.163 $4.306
GAAP Diluted EPS ($)$0.45 $0.40 $0.49
Adjusted Diluted EPS ($)$0.51 $0.49 $0.54
Reported Gross Margin %55.0% 54.2% 54.3%
Adjusted Gross Margin %56.0% 55.0% 54.6%
Reported Operating Margin %23.2% 21.6% 23.1%
Adjusted Operating Margin %27.0% 24.7% 25.3%
Net Income ($USD Millions)$616 $547 $662

Segment Net Sales ($USD Millions)

SegmentQ3 2024Q2 2025Q3 2025
U.S. Refreshment Beverages$2,390 $2,660 $2,735
U.S. Coffee$976 $948 $991
International$525 $555 $580
Total$3,891 $4,163 $4,306

Segment Operating Income – Reported ($USD Millions)

SegmentQ3 2024Q2 2025Q3 2025
U.S. Refreshment Beverages$722 $746 $802
U.S. Coffee$254 $233 $237
International$157 $143 $153
Unallocated Corporate($231) ($224) ($197)
Total$902 $898 $995

KPIs and Balance Sheet

KPIQ3 2024Q2 2025Q3 2025
Operating Cash Flow ($USD Millions)—$431 $639
Free Cash Flow ($USD Millions)—$325 $528
Cash & Equivalents ($USD Millions)$510 (12/31/24) $509 (6/30/25) $516 (9/30/25)
Principal Debt ($USD Millions)—$16,041 (6/30/25) $15,955 (9/30/25)
LTM Adjusted EBITDA ($USD Millions)—$4,698 $4,793
Management Leverage Ratio (x)—3.3x (6/30/25) 3.2x (9/30/25)

Note: Earnings estimate comparisons are not presented due to S&P Global consensus unavailability for Q3 2025 (see Estimates Context).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Constant Currency Net Sales GrowthFY 2025Mid-single-digit growth High-single-digit growth Raised
Adjusted Diluted EPS GrowthFY 2025High-single-digit growth High-single-digit growth Maintained
FX ImpactFY 2025~0.5 pt headwind (updated from ~0.5–1.0 pt earlier) ~0.5 pt headwind Maintained
Quarterly DividendQ4 2025 Payment$0.23/share declared Sept 16, 2025 $0.23/share payable Oct 10, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
Tariffs/Macro Cost PressuresManagement flagged rising tariffs and inflation; guided for back-half margin pressure (Q2 call) .Cost pressures mounting into Q4; continued tariff impact in early 2026 .Intensifying; embedded in plans.
Coffee Category & RecoverySequential improvement in pods; brewers pressured; pricing flowing through (Q2) .CEO/Chairman emphasized long-term growth drivers; Global Coffee Company strategy with JDE Peet’s .Strategic repositioning; cautious near term.
AI/Technology in MarketingShift to data/AI-enabled personalized marketing; higher ROIs expected (Q2) .Precision/personalized marketing scaling (Fansville); digital capabilities enabling DSD selling .Expanding deployment.
Route-to-Market/DSDNetwork expansion (AZ; CA/NV/Midwest Dr Pepper distribution); digital tools (Q2) .DSD scale cited as competitive advantage; drop sizes/service frequency improved; Mexico DSD expansion .Strengthening.
Energy & Sports HydrationMulti-brand energy portfolio scaling to 7% share; Electrolit +30% sales (Q2) .Continued momentum; GHOST integration strong; Ref Bev base accelerates .Sustained high growth.
Financing/LeverageComfortable leverage at ~3.3x; focus on FCF (Q2) .$7B strategic investments (JV + convertible) to reduce close leverage to ~4.6x; target standalone leverage ranges; dividend maintained across two companies .Proactively optimized.
Separation Timeline—Milestone-based; operationally ready by end of 2026; flexible on mechanics (spin/partial IPO) .Milestone-driven discipline.
Regulatory/Legal—Risks disclosed around regulatory approvals and litigation; non-GAAP usage clarified .Ongoing monitoring.

Management Commentary

  • “Strong innovation and in-market execution drove market share gains across key categories… contributing to solid earnings and free cash flow growth.” — CEO Tim Cofer (Q3 press release) .
  • “We now expect fiscal 2025 constant currency net sales growth in a high-single-digit range… outlook for Adjusted diluted EPS growth in a high-single-digit range is unchanged.” — Q3 guidance update .
  • “We are creating North America’s most agile beverage challenger and a true global coffee powerhouse.” — CEO Tim Cofer (Investor Day/Earnings call) .
  • “We have identified clear and actionable efficiencies that we know will generate $400 million in savings in the next three years.” — CEO on synergies with JDE Peet’s .
  • “We now expect net leverage to be below five times when the acquisition closes… targeting initial leverage ranges for BevCo 3.35–4x and Global Coffee Company 3.75–4.25x.” — CEO/CFO updates .

Q&A Highlights

  • Synergies & execution: Management reiterated $400M cost synergies in three years across procurement, manufacturing/logistics, SG&A/IT; “best of both” capabilities to underpin plans; clean room work commencing .
  • Tariffs & cost outlook: Cost pressure to “continue to mount in Q4 and carry over into the front half of next year”; no specific 2026 guidance provided yet .
  • Financing optionality: $7B capital solution co-led by Apollo and KKR reduces close leverage; potential additional deleveraging via non-core asset sales or partial BevCo IPO, subject to value maximization .
  • Separation timeline & governance: Milestone-based readiness by end-2026; board composition processes underway; flexibility on separation mechanics (spin vs partial IPO) .
  • Coffee algorithm: Low-single-digit net sales and high-single-digit EPS growth envisioned for Global Coffee Company; near-term leverage from cost synergies and deleveraging .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q3 2025 EPS and revenue were unavailable at time of retrieval; therefore, beats/misses versus consensus cannot be assessed (Values intended to be retrieved from S&P Global; data unavailable).

Key Takeaways for Investors

  • Mix-led top-line strength continues: U.S. Refreshment Beverages delivered outsized growth (+14.4%), with energy and sports hydration expansion and innovation in CSDs; trajectory supports the raised FY net sales outlook .
  • Coffee stabilizing but still volume-challenged: Price realization offsetting volume/mix pressure; near-term cost/tariff headwinds likely keep margins below prior-year adjusted levels, while structural repositioning via JDE Peet’s aims to unlock long-term growth .
  • Margin dynamics improving QoQ: Adjusted operating margin rose sequentially (24.7% in Q2 to 25.3% in Q3) though still below Q3 2024 adjusted levels; productivity and pricing remain critical levers .
  • Strong cash generation and balance sheet optimization: $528M Q3 FCF; LTM adjusted EBITDA of $4.79B; proactive financing reduces acquisition-close leverage and sets targeted leverage ranges at separation, preserving dividend continuity across successor companies .
  • Trading implications: Near-term stock reaction likely keyed to raised sales guidance and strong Ref Bev momentum vs lingering coffee/tariff margin headwinds; watch continued energy share gains and Q4 coffee elasticity/tariff updates for estimate revisions .
  • Medium-term thesis: Separation into focused BevCo and Global Coffee Company can crystallize distinct algorithms (MSD sales/HSD EPS for BevCo; LSD sales/HSD EPS for Coffee) with synergy capture and capital structures tailored to each, offering investors choice of profiles .
  • Monitor milestones: Regulatory approvals, synergy execution, leadership appointments, and separation mechanics (spin/partial IPO) will be catalysts through 2026; liquidity and deleveraging path supported by FCF .