Keurig Dr Pepper (KDP) is expected to deliver Q1 results that exceed Street consensus, with a favorable risk to reward position given the stock's year-to-date underperformance, RBC Capital Markets said Tuesday.
Q1 consumption data indicates low-single-digit growth, consisting of slightly faster growth sequentially in both US Refreshment Beverages and Coffee, according to the note.
However, consumption and reported numbers may differ, as Keurig expects benefit from the GHOST acquisition, but faces challenges from shipment timing, price elasticity in Mexico, and retailer inventory management in US Coffee, the firm noted. RBC said it believes these headwinds are already factored into consensus estimates.
As commodity prices have softened and tariffs have been removed, some competitors are lowering prices, analysts said. Keurig has not made any announcements so far about cutting coffee prices, but pricing actions across the category will be important to track, the brokerage said.
Keurig's guidance range this year is wide given the JDE Peet's acquisition, RBC said, adding that it expects the company to reiterate 2026 outlook.
While there is still negative sentiment surrounding the JDE Peet's acquisition, RBC said better leverage profiles have improved the overall outlook of the combination. Ultimately, the stock is cheap and coffee fundamentals seem to be improving, the brokerage added.
Keurig is scheduled to release its Q1 financial results before the market opens on Thursday.
RBC maintained an outperform rating on Keurig Dr Pepper with a price target of $42.
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