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Should You Invest in Keurig Dr Pepper or Move On?

After hitting long-term lows earlier this year, Keurig Dr Pepper (NASDAQ: KDP) had a positive earnings quarter which has revitalized the bullish case for the stock. The news has resulted in a nearly 5% increase in shares and the stock is now trading at a critical level that could potentially lead to a sustained rally. The question now is whether current shareholders will hold onto their positions or take advantage of the surge and cut their losses.

Key Points:
– Keurig Dr Pepper had a strong earnings quarter, beating expectations and raising guidance, which has lifted the stock from its long-term low.
– While the raised guidance could lead to a sustained rally, there are still hurdles to overcome.
– The analysts’ activity and ratings may influence the price action of the stock and prevent it from regaining critical support levels.
– The stock is currently down 17% from its recent highs and was down even more at its lowest point. This makes it a risky market to be in, particularly since the stock is at a critical level.
– If the stock can surpass and hold above $34, there is a possibility for it to trend higher. However, if the market fails to do so, the stock will likely move lower.

Diversified Keurig Dr Pepper Beats Expectations:
– Keurig Dr Pepper posted solid growth in Q2 and surpassed the consensus estimate, showcasing the benefits of diversification. However, the company’s growth of 6.6% falls behind the double-digit gains achieved by beverage giants PepsiCo (NASDAQ: PEP) and The Coca-Cola Company (NYSE: KO).
– The growth was primarily driven by an 11.8% increase in US refreshment beverages, but this was offset by a 5.7% decline in coffee sales. The decline in coffee sales can be attributed to factors such as consumers returning to work and consuming less coffee at home.
– The sales growth is mainly due to increased prices, with average pricing up 8.1% and volume down 2.1%, which is consistent with the industry.
– While the adjusted margin contracted slightly compared to last year, the increase in costs, including higher marketing expenses, is expected to result in improved sales in the future. The adjusted operating income rose 4.4% compared to last year and represents 23% of revenue. The GAAP earnings came in at $0.36 and adjusted earnings at $0.42 per share, both $0.02 better than expected. Adjusted EPS is up 7.6% year over year.

Positive Guidance:
– The best news in the earnings report is the raised guidance. The company cautiously increased its revenue guidance by 100 basis points to 5% to 6%, while reaffirming the EPS outlook. There is a possibility that the EPS growth could exceed estimates considering the strength of the top-line performance.
– Trends within the beverage industry support growth for Keurig Dr Pepper, Coca-Cola, and PepsiCo, and these trends are expected to remain solid throughout the year.

Keurig Dr Pepper Offers Value, But Analysts Aren’t Convinced:
– Compared to the stocks of PepsiCo and Coca-Cola, Keurig Dr Pepper offers value, trading at a lower price-to-earnings ratio of 18X. The other stocks trade closer to 25X and 26X, while also paying similar dividends. Keurig Dr Pepper currently has a yield of about 2.45%, while PepsiCo has a yield of 2.65% and Coca-Cola has a yield of 2.9%.
– The price action of Keurig Dr Pepper’s stock is currently favorable, with a nearly 5% increase and a strong candlestick pattern. The price action is above the long-term moving average, but it still faces resistance.
– There is strong resistance at $34, which could prevent the stock from moving higher. Additionally, the analysts’ ratings are not very supportive, as they currently rate the stock as a Hold with a price target that has been decreasing throughout the year. While the current consensus is above the critical resistance level, it may not remain that way for long.

In conclusion, before considering investing in Keurig Dr Pepper, it’s important to weigh the factors mentioned above. While the stock had a positive earnings quarter and offers value compared to its competitors, there are still hurdles and resistance levels to overcome. Analysts’ ratings and price targets may also impact the stock’s performance.

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