Keurig Dr Pepper Inc.

The stable rating outlook on KDP reflects S&P Global Ratings' expectations that it will continue to grow earnings and cash flows and rapidly reduce leverage. We believe the company will generate low- to mid-single-digit top-line growth and expand the EBITDA margin to over 30% primarily through achieving $600 million from synergies and on-going productivity programs by 2021. We forecast it will generate more than $2.2 billion in discretionary cash flow in 2019 and $1.4 billion in 2020. This should enable the company to deleverage to the mid-3x area within two years of the close of the merger. We could lower the ratings if KDP is unable to achieve its anticipated cost cutting, if operating performance deteriorates (possibility because of changing

...KDP has an advantaged product portfolio in categories with good growth. Keurig Dr Pepper (KDP) is the number one player in the North American single-serve coffee sector and holds the number three position in the North American liquid refreshment beverage industry. We expect single-serve coffee to be the fastest-growing segment of the coffee market and non-flavored carbonated beverages to grow faster than the overall carbonated beverage market. We expect the company to grow organic sales roughly 2% annually over the next three years. The merger of Keurig and Dr Pepper creates greater scale. The combined company has more than $11 billion of sales and has national and multi-channel distribution. The company should benefit from leveraging the direct store distribution capabilities and foodservice strengths that the legacy Dr Pepper Snapple business had with Keurig's e-commerce, direct to consumer, and office/hospitality capabilities. KDP has industry-leading margins. KDP generated pro forma...

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