Keurig Dr Pepper Dips as Goldman Cuts to Neutral on More Balanced Risk-Reward

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A Goldman Sachs analyst slashed the rating on Keurig Dr Pepper (NASDAQ:KDP) to Neutral from Buy, sending the company’s shares nearly 1.5% lower today.

The analyst blames the downgrade on a “more balanced risk/reward” on expectations that brewer household penetration and pod attach rates will moderate going forward. Moreover, the analyst sees a slowdown period for the company’s packaged beverage business growth amid a challenging macro environment.

“We see increased risk to KDP’s margins as commodity inflation, especially related to coffee, remains elevated for KDP vs its peers based on our updated commodity tracker,” the analyst said in a client note.

The analyst also slashed the price target to $37 from $39 to reflect modestly lowered FY22 & FY23 estimates, but enough to put Goldman below consensus.

“With limited n.t. positive catalysts and the stock trading at a 6% premium to its beverage peers on a FY23 P/E multiple basis (vs its avg 3-year discount of 2%), we see a better risk/reward elsewhere and therefore move to the sidelines on KDP,” the analyst concluded.

KDP shares are almost flat YTD.