Keurig Dr Pepper (NASDAQ:KDP) is set to report second-quarter earnings on Thursday, July 29. The company is following Coca-Cola (NYSE:KO) and PepsiCo (NASDAQ:PEP), which each reported fantastic results earlier this month.
Coca-Cola and PepsiCo each beat estimates and raised guidance for revenue and EPS for the rest of fiscal 2021. That is setting a high bar for Keurig Dr Pepper to clear when it reports second-quarter earnings. Investors are hoping the company will meet the challenge.
A reopening economy will be beneficial but create volatility
Keurig Dr Pepper has been experiencing mixed effects from the pandemic. On the one hand, its at-home coffee business is thriving. Folks working from home are drinking more coffee, and so sales of Keurig machines and K-Cups are doing well. On the flip side, when folks were not going out as often, sales of its beverages at convenience stores and restaurants were not doing as well. Overall, the effects remain positive, and the company reported first-quarter year-over-year revenue growth of 11%.
Whether Keurig Dr Pepper likes it or not, economies are on the path to reopening. In the U.S., states have eased restrictions on businesses, and people are leaving their homes again. The trend should help sales of its beverages in higher-priced, higher-margin channels like convenience stores, gas stations, and restaurants. CEO Bob Gamgort commented on the uncertainty surrounding economic reopenings in a press release: "... we see an improving but volatile macro environment marked by increasing consumer mobility and rising inflationary headwinds."
One of the last legs of the reopening of economies looks to be a return to in-office work. The majority of the population has been working from home since the onset of the pandemic. While some businesses have announced dates by which they would like to have employees back in the office, the surge in cases caused by the delta variant is leading some to delay those plans.
Still, the emergence of remote work should be a long-run positive for Keurig Dr Pepper. Most companies have told workers that they would allow working from home part of the week, even in the aftermath of the pandemic. That could mean a Keurig machine in the office and at home -- and fridges stocked with beverages at both locations.
What this could mean for investors
Analysts on Wall Street expect Keurig Dr Pepper to report revenue of $3.05 billion and EPS of $0.37 in the second quarter, which would be increases of 6.6% and 12%, respectively, from the year before. Management has already raised its yearly revenue growth outlook for 2021 to a range of 4% to 6%, from the previous range of 3% to 4%.
But Coca-Cola and PepsiCo have raised their revenue growth targets for 2021 to 13% and 6%, respectively. Keurig Dr Pepper's stock price is already up 13% year to date. And because its rivals already reported excellent quarters and raised revenue growth targets above its own, it will not be surprising to see some stock sell off if it reports a pedestrian quarter without raising guidance again.