Keurig Dr Pepper Stock Jumps 7% on Impressive Profit Growth

Keurig Dr Pepper Stock Popped Today

The company's profits are above expectations. Shares of coffee and carbonated beverage giant Keurig Dr Pepper (NASDAQ: KDP) popped on Thursday after the company reported soaring profits in its latest quarterly financial report.

Profits are up more than sales

Keurig Dr Pepper mostly sells coffeemakers, coffee brewing supplies, and packaged beverages. In the first quarter of 2024, the company's net sales were only up by a modest 3% to $3.5 billion. However, it enjoyed substantial improvements to profits, which is what investors are cheering today.

• Keurig Dr Pepper's gross margin expanded to nearly 56% compared with 52% in the prior-year period.
• Productivity improvements were partially credited for the increase.
• On an adjusted basis, the company's Q1 operating income jumped 17.5% to $825 million.

How is management using profits?

Keurig Dr Pepper's management credited itself with buying back more stock than ever during Q1 -- it used $1.1 billion during Q1 alone, which was a record. Management said it was being opportunistic with the stock's valuation. But that's only half the story.

• JAB Holding Company owns a lot of Keurig Dr Pepper stock. And in March, it announced it was divesting 100 million shares.
• Management was buying up these shares to prevent downward pressure on the stock.
• Keurig Dr Pepper did get a good deal on these shares at under $30 per share. But JAB has more to sell, which may lead to more sellers than buyers for a while.

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