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Dr Pepper Snapple's quarterly earnings tops estimates

Dr Pepper Snapple Group Inc.'s adjusted EPS rose 4.0% year over year in the second quarter and exceeded market expectations, benefiting from changes in its effective tax rate.

The U.S. beverage company earned $1.30 per share on an adjusted basis in the quarter that ended June 30, up from $1.25 per share a year ago and higher than the S&P Global Market Intelligence consensus normalized EPS estimate of 29 cents for the period.

Net income on a GAAP basis climbed to $235 million, or $1.30 per share, in the quarter, from $188 million, or $1.02 per share, a year earlier.

Second-quarter net sales grew year over year to $1.89 billion from $1.80 billion, while operating income fell to $362 million from $375 million.

"The strong net sales performance in the second quarter of 2018 was driven by successful innovation behind Canada Dry, continued growth of Bai and gains in Mott's juices and several Allied Brands," Keurig Dr Pepper Inc. said in a statement.

First-half net income rose to $394 million, or $2.17 per share, from $365 million, or $1.98 per share, in the prior-year period. First-half core earnings increased year over year to $2.28 per share from $2.25 per share.

Net sales improved to $3.48 billion in the first half from $3.31 billion a year ago, while income from operations during the period fell to $621 million from $661 million.

Dr Pepper Snapple completed its merger with Keurig Green Mountain Inc. in July to form Keurig Dr Pepper. Bob Gamgort, the CEO of the new company, said the integration of the businesses "is well on track."

"On financials, the second-quarter results reported today are fully consistent with our full year outlook for 2018," Gamgort said.

Keurig Dr Pepper's shares were up 1.30% to $24.17 at 10:12 a.m. ET.

For the full year, Keurig Dr Pepper is projecting adjusted EPS of $1.02 to $1.07, on a pro forma basis and after the impact of preliminary purchase price accounting adjustments.

Keurig Dr Pepper also estimates $600 million in merger-related synergies from 2019 to 2021, with $200 million in savings expected per year.

In addition, the company expects "significant" cash flow generation and deleveraging, with a leverage ratio targeted to be less than 3.0x in two to three years.

Keurig Dr Pepper will report combined results of Keurig Green Mountain and Dr Pepper Snapple starting with the third quarter ending Sept. 30.

In the quarter that ended June 30, Keurig Green Mountain's net sales ticked up year over year to $949 million from $948 million, and adjusted operating income rose to $288 million from $260 million.