Keurig Dr Pepper Q2 Earnings Call Highlights

Key Points

• Keurig Dr Pepper exceeded second-quarter expectations, with consolidated sales up 74.6% to include JDE Peet’s and legacy KDP sales rising 7.3%. Adjusted EPS increased 16% to $0.57, while adjusted operating income grew more than 40%.
• U.S. Refreshment Beverages drove performance, with sales up 10% and operating income up 11.9%, supported by Dr Pepper, Canada Dry, Bloom and Ghost. U.S. Coffee remained pressured by lower pod volumes, higher coffee costs and tariffs, although management expects improvement in the second half.
• KDP reaffirmed its 2026 outlook and continues targeting an early 2027 separation of its beverage and coffee businesses. The company also remains on track for $400 million in JDE Peet’s cost synergies, approximately $2.5 billion in full-year free cash flow and low-double-digit constant-currency EPS growth.

Keurig Dr Pepper NASDAQ: KDP reported second-quarter results that exceeded its expectations, supported by strong growth in U.S. Refreshment Beverages and an incremental contribution from its acquisition of JDE Peet’s, which closed April 1.

Chief Executive Officer Tim Cofer said total net sales increased 75% in the quarter, including the acquisition, while legacy KDP sales rose at a high-single-digit rate. Adjusted operating income increased more than 40%, and adjusted earnings per share rose 16% to $0.57.

Chief Financial Officer Anthony DiSilvestro said consolidated net sales grew 74.6%, while legacy KDP sales increased 7.3%. Net price realization accounted for 4.2 percentage points of the legacy sales gain and volume mix contributed 3.1 points.

Refreshment beverages lead growth

U.S. Refreshment Beverages remained the company’s largest growth driver. Segment sales increased 10%, including 6.5 percentage points of volume-mix growth and 3.5 points from pricing. Segment operating income rose 11.9%, as sales growth and productivity savings more than offset cost inflation.

Cofer said growth was broad-based across carbonated soft drinks, energy, water and sports hydration. Dr Pepper gained market share, supported by the Zero Sugar platform, which posted nearly 30% retail-sales growth, as well as the Creamy Coconut limited-time offering introduced in April. Canada Dry retail sales rose at a double-digit rate, aided by its Fruit Splash platform and Strawberry launch.

The company’s energy portfolio crossed a 9% market-share threshold during the quarter. Cofer cited momentum in Bloom and Ghost, as well as early results from redesigned C4 packaging. He said KDP’s energy business is running at roughly $1.5 billion in net sales and remains positioned to reach its double-digit market-share target.

On the call, Cofer said the company expects refreshment-beverage growth to moderate in the second half as it laps more difficult comparisons, though he said the business should continue to generate strong results. Both company-owned and partner brands contributed meaningfully to first-half performance, he added.

U.S. coffee remains under pressure as JDE Peet’s exceeds expectations

U.S. Coffee sales declined 3.2% in the second quarter, while segment operating income fell 24.7%. DiSilvestro attributed the profit decline primarily to higher green-coffee costs and tariff effects, alongside lower volume mix and higher marketing spending.

Pod shipments declined 11.6% on a reported basis, or 8.3% excluding a reporting shift related to Peet’s K-Cups. Following the JDE Peet’s transaction, KDP shifted the recognition of Peet’s K-Cup sales and profit between segments. The shift negatively affected U.S. Coffee in the second quarter but is expected to benefit the segment in the second half, with no enterprise-level impact.

Brewer shipments increased 2.1%, returning to growth with support from marketing and commercial activity, as well as easier comparisons against retailer destocking in the prior year. McCafé K-Cups recorded mid-single-digit retail-sales growth, while La Colombe ready-to-drink cold coffee sales increased more than 50%.

Cofer said the U.S. coffee category slowed in the quarter, with a mix shift toward private label and continuing trade-inventory headwinds affecting pods. However, management expects improved second-half trends as lower-cost inventory flows through results, tariff impacts ease and pod inventory dynamics normalize.

The JDE Peet’s segment generated approximately $2.8 billion in quarterly net sales and $414 million in operating income. Results were ahead of KDP’s expectations, driven by pricing net of cost inflation, productivity savings and favorable timing related to derivative-gain recognition and marketing phasing.

DiSilvestro cautioned that the second quarter would likely represent JDE Peet’s high-water mark for quarterly earnings contribution in 2026, given those timing benefits and the shift of Peet’s K-Cup economics back into U.S. Coffee during the second half.

Integration and planned separation advance

KDP said it has begun capturing cost synergies from JDE Peet’s and remains confident in its previously identified $400 million cost-synergy program. The company has combined U.S. customer sales efforts and moved to a single invoice for the Keurig and Peet’s portfolio without disruption, according to Cofer.

The company has also largely finalized post-separation organizational structures across operational, commercial and finance functions, and is advancing IT and financial-reporting preparations for the future beverage and coffee businesses. KDP continues to target an early 2027 separation.

Management said its search for a Global Coffee Co. CEO is progressing and that it expects to have a leader in place with enough time to shape strategy before the planned separation. Cofer said the company would prioritize identifying the right executive rather than compromising on quality for speed.

KDP generated $714 million of free cash flow during the quarter and ended the period with pro forma management leverage of 4.4 times, slightly better than its expectations. The company continues to target leverage of about 4.1 times by year-end and approximately $2.5 billion in full-year free cash flow.

Full-year outlook reaffirmed

KDP reaffirmed its 2026 outlook for total net sales of $25.9 billion to $26.4 billion, including an $8.5 billion to $8.7 billion contribution from JDE Peet’s. Legacy KDP sales are expected to grow 4% to 6% in constant currency, with management now viewing the high end of that range as more likely.

The company also maintained its forecast for low-double-digit constant-currency EPS growth. Its updated outlook includes an incremental 2% non-cash EPS headwind from higher-than-expected depreciation expense tied to the JDE Peet’s purchase-price allocation, which KDP expects to be largely offset by a one-time cash benefit from tariff refunds.

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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