Keurig Dr Pepper Q1 Earnings Call Highlights

Key Points

• Keurig Dr Pepper closed the acquisition of JDE Peet’s and is preparing to split into two public companies, targeting operational readiness by end‑2026 with a likely separation in early 2027; management expects about $400 million of synergies and reaffirmed 2026 guidance including total net sales of $25.9–$26.4 billion and low double‑digit EPS growth.
• Q1 financials showed net sales up ~8% (roughly 5.5 points from price and 2.6 points from volume/mix) while EPS fell 7.1% to $0.39, as gross margin contracted ~220 basis points and the company lapped a prior‑year gain.
• By segment, U.S. Refreshment Beverages delivered double‑digit net sales and operating income growth, while U.S. Coffee was hit by higher green coffee costs, tariffs and inventory adjustments with management expecting moderation in Q2 and stronger improvement in H2 2026; deal financing pushes expected net leverage to about 4.5x at mid‑year, with debt paydown a priority.

Keurig Dr Pepper NASDAQ: KDP executives said the company’s first quarter results came in modestly ahead of internal expectations as it closed the acquisition of JDE Peet’s and continued preparations to separate into two standalone public companies.

Chief Executive Officer Tim Cofer said the company is balancing “longer-term foundational work with near-term execution,” with 2026 priorities unchanged: delivering low double-digit EPS growth, integrating JDE Peet’s and beginning to unlock combination benefits, and achieving milestones toward a planned separation. Cofer reiterated KDP is targeting operational readiness to separate by the end of 2026, with the transaction “likely to occur in early 2027, subject to market conditions.”

Quarterly results: sales up 8%, EPS down on costs and prior-year gain

For the first quarter, Cofer said net sales grew 8% with positive contributions from net price realization and volume/mix. Chief Financial Officer Anthony DiSilvestro reported net sales increased 8.1%, with net price realization contributing 5.5 percentage points and volume/mix contributing 2.6 points.

DiSilvestro said gross margin contracted 220 basis points as elevated cost pressures were only partly offset by price and productivity savings. SG&A was flat as a percent of sales, with transportation and warehousing efficiencies offsetting higher marketing across all three segments. Operating income declined 1.9%.

Earnings per share decreased 7.1% to $0.39. DiSilvestro attributed the decline in part to “lapping last year’s $0.02 gain on the sale of our Vita Coco stake,” while Cofer also cited the timing of costs and tariffs.

U.S. Refreshment Beverages posts double-digit growth

KDP’s U.S. Refreshment Beverages segment delivered another quarter of double-digit net sales and operating income growth. DiSilvestro reported segment net sales increased 11.9%, driven by 7.2 points of volume/mix and 4.7 points of price realization. Segment operating income rose 9.8%, as net sales growth and productivity savings more than offset inflation and higher marketing spend.

Cofer said performance reflected favorable trends in core carbonated soft drinks and momentum in emerging growth areas. He said retail sales dollars for CSDs grew at a mid-single-digit rate in the quarter, accelerating from the fourth quarter. While Dr Pepper faced a difficult comparison against last year’s Blackberry innovation, Cofer said the brand’s regular, diet, and zero sugar lines “collectively gain[ed] share,” supported by demand generation and point-of-sale execution.

Cofer highlighted innovation as a driver for the remainder of the year, including the national launch of Canada Dry Fruit Splash Strawberry in February and the recent relaunch of Dr Pepper Creamy Coconut as a limited-time offering. He also noted momentum in “better-for-you” areas such as Bloom Pop prebiotic CSDs and double-digit growth in zero-sugar CSD offerings.

In response to a question on sustainability and SNAP changes, Cofer said KDP expects the segment to continue delivering strong results in 2026, though he cautioned that net sales growth is likely to moderate from “Q1 elevated levels.” He said first quarter results benefited from incremental Ghost distribution year over year, which he later quantified as “a couple of points” to segment growth. On SNAP, Cofer said impacts have been “manageable and largely consistent with our expectations and our plans.”

U.S. Coffee pressured by costs, inventory adjustments; improvement expected later in 2026

U.S. Coffee results declined in the quarter, but management said the performance tracked with expectations due to temporary headwinds. DiSilvestro reported segment net sales fell 2.3%, driven by an 8.2-point decline from volume/mix, partly offset by 5.9 points of net price realization. Pod shipments declined 7% amid trade inventory adjustments, and brewer shipments declined at a high single-digit rate “primarily driven by elasticity.” Segment operating income dropped 21.3%, reflecting higher green coffee costs and tariffs, shipment declines, and increased marketing, partially offset by pricing and productivity.

Cofer said the broader coffee category remains healthy, noting the Keurig-compatible subsegment grew retail sales at a nearly 4% rate. He highlighted strong performance for the licensed Lavazza brand, which he said grew K-Cup sales more than 50% due to brand strength, innovation, and expanded distribution.

Management emphasized that first quarter profitability pressure was driven by timing. Cofer said peak year-over-year costs reflected higher-cost green coffee hedges and tariffs, and trade inventory adjustments weighed on shipments and operating income. DiSilvestro said the Q1 decline should be the most significant of the year and that pressures “should begin to moderate a bit in Q2,” with a “larger improvement” expected in the back half as cost inflation eases and trade inventory dynamics normalize.

Executives also outlined ongoing investments in the segment, including the Keurig Coffee Collective innovation launch, the renewal and expansion of KDP’s K-Cup agreement with Nestlé USA to support Starbucks distribution and innovation, and preparations for the Keurig Alta system with a targeted direct-to-consumer launch planned for later in 2026.

Asked about pricing as green coffee prices improve, Cofer said 2026 pricing is primarily a carryover from 2025 actions taken to offset inflation and that year-over-year pricing impacts should moderate in the second half as KDP laps prior increases and cost pressure eases. He said it was “not appropriate” to speculate on future pricing actions, while emphasizing the company’s focus on monitoring elasticities and maintaining consumer value.

International growth driven by pricing; financing and outlook reaffirmed

KDP’s International segment posted high single-digit net sales growth, driven primarily by price realization. DiSilvestro said constant-currency net sales rose 8.5%, including 9.2 points from net price realization, partially offset by a 0.7-point decline in volume/mix. Segment operating income declined 15.1% on a constant-currency basis due to cost pressures, including the Mexico beverage tax, and higher marketing.

DiSilvestro also reviewed financing for the JDE Peet’s acquisition, including a $4.5 billion Beverage Co. convertible preferred equity investment, a $4 billion coffee pod manufacturing joint venture minority investment, about $6 billion of newly issued long-term senior debt, and additional term loan borrowing. He said KDP expects net leverage of approximately 4.5x at mid-year and will prioritize debt paydown, with free cash flow as the primary deleveraging source while also assessing “non-core asset divestitures.”

For 2026, KDP reaffirmed its outlook, including JDE Peet’s contribution from the April 1 close and reporting JDE Peet’s as a separate segment until separation. DiSilvestro said the company expects:

• Total company net sales of $25.9 billion to $26.4 billion, including 4% to 6% constant-currency growth for legacy KDP and an $8.5 billion to $8.7 billion contribution from JDE Peet’s.
• Low double-digit EPS growth in constant currency, including a 6 to 7 percentage point contribution from the acquisition and 4% to 6% growth for legacy KDP.
• FX tailwind of about 1 percentage point to net sales and EPS growth based on current rates.

On phasing, DiSilvestro said the company expects “high single-digit EPS growth in Q2 with further acceleration in the back half,” driven by improving costs and building synergies. In the Q&A, Cofer clarified that the high single-digit expectation for Q2 refers to the total company.

Cofer said early integration work since the April 1 close has confirmed planning assumptions, and he reiterated confidence in $400 million in synergies and incremental revenue opportunities, “in particular here in North America, between the Peet’s brands and the Keurig brands.” He added that, similar to KDP’s U.S. Coffee business, JDE Peet’s results are expected to be more constrained in the first half due to commodity timing, with accelerating trends in the second half as green coffee becomes more favorable.

About Keurig Dr Pepper NASDAQ: KDP

Keurig Dr Pepper NASDAQ: KDP is a North American beverage company formed in July 2018 through the combination of Keurig Green Mountain and Dr Pepper Snapple Group. The company designs, manufactures, markets and distributes a wide range of hot and cold beverages and related equipment, combining Keurig's single‑serve coffee systems with a large portfolio of carbonated and noncarbonated drink brands. It operates a network of manufacturing, packaging and distribution facilities to supply retail, foodservice and e-commerce channels across its served markets.

The company's product mix includes single‑serve coffee brewers and coffee pods under the Keurig brand as well as a broad assortment of branded beverages.

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