The beverage giant came up short on the top line and surprised investors with an acquisition.
Shares of Keurig Dr Pepper (KDP -4.80%) were heading lower today after the beverage giant posted disappointing results in its third-quarter earnings report. The company also said it would acquire Ghost, a maker of energy drinks.
As of 9:58 a.m. ET, the stock was down 4.3% on the news.
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Keurig comes up short
Keurig Dr Pepper reported revenue in the quarter up 2.3% to $3.89 billion, which was short of estimates at $3.93 billion.
Sales were up 3.1% on a constant-currency basis, benefiting from a 3.5% increase in volume and sales mix, though prices fell 0.4%. The U.S. soft drink business was strong with sales up 5.3% to $2.4 billion, though U.S. coffee sales were down 3.6% to $1 billion.
Further down the income statement, the company said adjusted operating income was up 7.5% to $1.05 billion. Adjusted earnings per share (EPS) rose from $0.48 to $0.51, matching estimates.
The bigger news seemed to be the company’s acquisition of Ghost, an energy drink business that gives it exposure to growth in beverages.
It agreed to pay $990 million for a 60% stake in the business and will purchase the remaining 40% in 2028 at a valuation that’s based on Ghost’s 2027 financial performance.
Management said the deal would be neutral to modestly accretive to EPS starting in 2025.
What’s next for Keurig Dr Pepper
Keurig Dr Pepper reaffirmed its full-year guidance calling for constant-currency sales in the mid-single-digit range, and adjusted EPS in the high-single-digit range.
While the financial results were mostly fine, the Ghost acquisition seems to be giving investors pause as it comes at a time when the energy drink category is slowing.
Keurig is paying a price-to-sales multiple of 3 for Ghost, which is similar to the valuation that Keurig trades at. Keep an eye on the integration in the coming quarters. KDP will want to avoid the challenges that PepsiCo has had in its deal with Celsius Holdings as Pepsi seemed to overestimate demand for Celsius.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius. The Motley Fool has a disclosure policy.
