Dr Pepper Snapple Group Inc. Earnings: Margins Shrink Again, but Net Income Climbs

S&P 500 (NYSE:SPY) component Dr Pepper Snapple Group Inc. (NYSE:DPS) reported net income above Wall Street’s expectations for the fourth quarter. Dr Pepper Snapple Group manufactures and distributes flavored carbonated soft drinks and non-carbonated beverages in North America.

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Dr Pepper Snapple Group Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the soft drink company rose to $166 million (77 cents per share) vs. $112 million (49 cents per share) in the same quarter a year earlier. This marks a rise of 48.2% from the year earlier quarter.

Revenue: Rose 3.5% to $1.46 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: Dr Pepper Snapple Group Inc. reported adjusted net income of 82 cents per share. By that measure, the company beat the mean estimate of 74 cents per share. Analysts were expecting revenue of $1.45 billion.

Quoting Management: DPS President and CEO Larry Young said, “As I look back on a year of unprecedented commodity and retail price increases, I am pleased with the performance of our brands. Our national rollout of Dr Pepper TEN has been well received by our bottling partners, retailers and consumers and I am excited about the marketing plans we have in place in 2012 for this breakthrough product. Sun Drop is now the No. 2 brand in the citrus category, driving 43% of the growth in that category. Our tea and juice portfolios continued to outperform industry trends.”

“I’m extremely proud of the efforts of our great employees to get our well-loved brands into the hands of more consumers, all while embracing a rapid continuous improvement mindset that will make us better and faster in everything we do,” Young added. “Looking forward we are cautiously optimistic about the economic recovery. With plans that are stronger than ever in 2012, I am confident that we will continue to execute our focused strategy and deliver strong shareholder returns.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 2.1 percentage points to 58.7% from the year earlier quarter. Over that time, margins have contracted on average 1.9 percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 4.9% to $1.53 billion in the third quarter. The figure rose 4.1% in the second quarter from the year earlier and climbed 6.7% in the first quarter from the year-ago quarter.

The company has now beaten estimates the last two quarters. In the third quarter, it topped expectations with net income of 71 cents versus a mean estimate of net income of 70 cents per share.

The company has now seen net income rise in two straight quarters. In the third quarter, net income rose 6.9% from the year earlier.

Looking Forward: Over the past sixty days, the outlook for the company’s performance next quarter has become increasingly unfavorable. The average estimate for the first quarter of the next fiscal year is 53 cents per share, a drop from 54 cents. For the fiscal year, the average estimate has been unchanged at $2.72 a share.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com