Research Update: Keurig Dr Pepper Inc. 'BBB' Rating Affirmed On Revised Financial Policy; Outlook Stable

Beverage and coffee pod maker Keurig Dr Pepper Inc. (KDP) recently revised its capital allocation priorities and financial policy, including a lower debt to EBITDA target of 2.0x-2.5x and expectation for more modest merger&acquisition (M&A) activity. However, S&P Global Ratings-adjusted leverage (including our debt adjustment for the company's supply chain financing program) totaled 3.9x for the fiscal year ended Dec. 31, 2022 (fiscal 2022), well above the company's target. Additionally, it has not demonstrated a track record of deleveraging since announcing its new financial policy and has only modest annual S&P Global Ratings-adjusted EBITDA growth over the past couple of years. Therefore, we affirmed all ratings on KDP, including the 'BBB' issuer credit rating. The stable outlook reflects

...- Beverage and coffee pod maker Keurig Dr Pepper Inc. (KDP) recently revised its capital allocation priorities and financial policy, including a lower debt to EBITDA target of 2.0x-2.5x and expectation for more modest merger & acquisition (M&A) activity. - However, S&P Global Ratings-adjusted leverage (including our debt adjustment for the company's supply chain financing program) totaled 3.9x for the fiscal year ended Dec. 31, 2022 (fiscal 2022), well above the company's target. Additionally, it has not demonstrated a track record of deleveraging since announcing its new financial policy and has only modest annual S&P Global Ratings-adjusted EBITDA growth over the past couple of years. - Therefore, we affirmed all ratings on KDP, including the '###' issuer credit rating. - The stable outlook reflects our expectation that the company will steadily reduce leverage over the next two years toward 3x while growing through organic sales expansion and modest-sized bolt-on M&A or partnership investments....

Research Update