Keurig Dr Pepper’s Split Plan Could Unlock Hidden Value

Key Points

• Keurig Dr Pepper's acquisition/split is on track to be completed this year.
• Analysts and institutional data reveal the stock is being accumulated.
• A successful split into pure-play companies could unlock a price-to-earnings expansion.

Keurig Dr Pepper’s NASDAQ: KDP stock price has been under pressure for years as its businesses struggled, strategy concerns emerged, and analysts panned the name. However, that story is changing, as its core businesses have returned to growth and the planned separation into two traded companies is progressing.

KDP's Q4 2025 earnings covered progress on acquiring JDE Peet's and splitting into two companies. The company secured an extra $1.5 billion in preferred equity, bringing that total to $4.5 billion and removing the need for a partial IPO. The deal still involves significant debt and is expected to close in early April.

KDP Outperforms Competitors in Fiscal Q4

Keurig Dr Pepper had a solid Q4, with revenue growing by 10.5% to $4.45 billion, outpacing competitors and consensus estimates. Growth was underpinned by all segments, led by a 21% increase in International, an 11.5% increase in U.S. refreshment beverages, and a 3.9% gain in U.S. coffee. Strength was underpinned by volume and pricing, with pricing up by 6% and volume/mix up by 3.9%. 

Margin news was also good. The company experienced margin pressures but navigated the environment well, producing income and earnings growth above forecasts, albeit muted compared to the top line. Adjusted operating income increased by nearly 5%, adjusted earnings by nearly 2%, and free cash was ample at $564 million, enabling capital returns and balance sheet improvements ahead of the planned merger. 

The guidance was also bullish. The company forecast its core business to grow by 5% on a currency-neutral basis, better than the consensus forecast from MarketBeat.

The impact on sentiment was positive, though no analysts issued revisions immediately after the release. Prerelease activity was also light, with the most recent updates issued in late 2025, affirming the Moderate Buy rating and the $35 price forecast.

The $35 price target is significant because it is 15% above the critical support level and the critical resistance at the long-term EMA. A move above the long-term EMA, near $31.75, would signal a shift in dynamics and potential for additional upside. 

Institutions Indicate KDP Is One Hot Buy

The institutional activity in KDP stock is bullish, indicating it is a hot buy for long-term holders. MarketBeat’s data shows the group owns approximately 94% of the stock and has been buying on balance over the trailing 12 months. More importantly, aside from Q3 2025 profit taking, bullish activity ramped to long-term highs in 2025, extending the trend into Q1 2026, when it set a record. The activity balance in Q1 tops $3 bought for each $1 sold, a robust tailwind for price action which is likely to continue blowing. 

Among the incentives is the eventual split of KDP into two pure-play companies, which will enable price-to-multiple expansions. As it stands, the combined entity trades at 15X its current-year earnings, a 30% to 60% discount relative to its beverage peers, PepsiCo NASDAQ: PEP and Coca-Cola NYSE: KO, and even deeper discounts relative to coffee giants. Starbucks NASDAQ: SBUX, the world’s largest coffee brand, trades at a whopping 40X the current year outlook, suggesting the Global Coffee Co. stock could rise by more than 100% soon after the split. 

KDP Advances After Robust Guidance

The KDP stock price action was bullish following the release. KDP's share price advanced by more than 3%, revealing support at the 150-day and 30-day EMAs as it rose to a six-month high. The move is accompanied by bullish indicators, with stochastic and MACD aligning with market strength. There is a risk the market will top out near its resistance target near $31.75; if so, KDP shares could correct to the $29 level or lower before moving any higher. 

KDP risks include the merger and execution. The merger is on track but could be derailed at any time by regulatory hurdles. Assuming the merger closes as planned, the company still faces a challenging integration as it prepares for the next step. Additionally, the company faces increased debt leverage, which will impair cash flow in the upcoming quarters. Catalysts include the successful merger, sustained improvement in core consumer businesses, and progression toward the eventual split.