Dr Pepper Snapple Group (NYSE: DPS) popped open its first-quarter report on Wednesday (I bet you never read that pun before from a financial pundit covering a beverage concern!). On an adjusted basis, sales rose 4%. Management needed to adjust for the termination of a contract with Hansen (NASDAQ: HANS), as well as for currency effects. The company saw a drop in bottom-line income excluding items as earnings came in at $0.37 per share. This was $0.03 less than last year's performance.
However, Dr Pepper can feel happy about the fact that the company beat expectations. The market was only looking for $0.29 per share. How refreshing (yep, another pun)! Volumes did all right during the quarter.
The company did well with its cash flows. Last year at this time, Dr Pepper generated $100 million from operations. This time around, that number ballooned to $178 million. Although capital spending increased, the business was still on the positive side of the ledger in terms of free cash flow.
Dr Pepper had a good quarter overall. However, I think there's room for improvement. The beverage industry is a tough one. Both The Coca-Cola Company (NYSE: KO) and PepsiCo, Inc. (NYSE: PEP) have had their own issues with growth. Dr Pepper should look to new marketing schemes and advertising campaigns to keep the excitement going when it comes to its core brands. Distribution strategies are important, but at the end of the day, maintaining brand equity is what keeps a beverage business going.
You can't complain about the recent performance of Dr Pepper's stock. It's probably going to keep up the momentum. I happen to own shares of Coke and am not looking to buy another beverage entity. I also am more comfortable owning Coke since I like the strength of that company's product portfolio. Dr Pepper will, however, probably grow over time, thus making it a potential idea for the patient investor with a long-term horizon.
Disclosure: I own Coke; positions can change without notice.
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