Keurig Dr Pepper Inc.

Overview Key strengths Key risks Favorable organic growth outlook. Elevated leverage, though steadily declining toward the company?s long-term target. Good portfolio diversification with leading shares in categories that its closest peers do not dominate. Greater geographic concentration compared to peers. Strong margins that are rebounding to historical levels as cost inflation eases. Temporarily negative discretionary cash flow (DCF) due to share repurchases. Good free operating cash flow (FOCF). We estimate the company's S&P Global Ratings-adjusted debt to EBITDA for the 12 months ended June 30, 2024, increased modestly to 3.8x from 3.6x for the fiscal year ended Dec. 30, 2023. The increased leverage primarily reflects additional debt to fund $1.1 billion of share repurchases in the first quarter of the

...Deleveraging has been further delayed because of this year's share repurchases. We estimate the company's S&P Global Ratings-adjusted debt to EBITDA for the 12 months ended June 30, 2024, increased modestly to 3.8x from 3.6x for the fiscal year ended Dec. 30, 2023. The increased leverage primarily reflects additional debt to fund $1.1 billion of share repurchases in the first quarter of the current fiscal year; Keurig Dr Pepper Inc. (KDP). repurchased 35 million of its common shares sold by JAB Holding Co S.A.R.L in a 86.9 million share secondary offering. Although KDP has a management-defined leverage target of 2.0x-2.5x, its first-quarter share repurchases have delayed deleveraging closer to its target to beyond fiscal 2025. Still, we do not view its recent share repurchases as signaling a more-aggressive financial policy because...

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