Episode Details

Keurig Dr Pepper (KDP) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): net sales $7,309M vs $4,163M, up 75.6% (constant currency +74.6%); excluding JDE Peet's, legacy KDP grew 7.3% on +4.2% price and +3.1% volume/mix. Adjusted diluted EPS $0.57 vs $0.49, +16.3%, against a Street bar near $0.537. But GAAP diluted EPS was $0.04, down 90.0%, and GAAP operating income FELL 30.1% to $628M while adjusted operating income rose 42.9% to $1,478M. Adjusted operating margin 20.2% vs 24.7%; adjusted gross margin 46.5% vs 55.0%. Full-year guidance reaffirmed. The 8-K was accepted by the SEC at 7:02am ET (before the open), so Aug 6 is a reaction session: $30.75 to $30.37 (-1.24%), then $30.01 (-1.19%) on Aug 7 - down 2.41% over two sessions and 14.7% below the 12-month closing high. Net sales rose $3,146M year on year. Adjusted net income attributable to COMMON shareholders rose from $680M to $783M - $103M. That is 3.3 cents of adjusted earnings on each incremental revenue dollar, against a legacy business that converts 16.3 cents. The reconciliation is on the face of the release: JDE Peet's added $414M of adjusted segment operating income, adjusted interest expense rose $125M ($180M to $305M), tax at their own 23.1% adjusted rate takes it to ~$222M, then $82M was allocated to Preferred Investors and $68M to noncontrolling interests. About $72M a quarter reaches the common holder on $16,615M of cash deployed. And 53 of the 57 adjusted cents - 93% - are add-backs: $0.19 of deal/integration/financing cost, $0.17 of inventory step-up, $0.07 of intangible amortisation. THE CALL: BUY (3/5, A GOOD BEVERAGE COMPANY AND A POOR COFFEE COMPANY, PRICED AS ONE MEDIOCRE ONE, EIGHTEEN MONTHS BEFORE THEY SEPARATE) — base-case value ~$34.0 vs ~$30.01 today. KEY METRICS: - CALL: BUY 3/5, fair value $34.00 vs the $30.01 Aug 7 close (+13.3%, +16.4% with the 3.07% dividend). Bull $46, bear $20, add under $27. Street: Buy, 28 analysts, 16 buy / 12 hold / 0 sell, avg target $35.67. - Net sales $7,309M +75.6%; adjusted EPS $0.57 +16.3%; GAAP EPS $0.04 -90.0%. Adjusted operating margin 20.2% vs 24.7%. - $3,146M of new revenue produced $103M of new adjusted earnings to common - 3.3 cents on the dollar. What to watch: UP: the separation into Beverage Co. and Global Coffee Co. is targeted for EARLY 2027 and forces the market to price a 29.9%-margin U.S. Refreshment Beverages business (volume/mix +6.5%, price +3.5%) separately from a mediocre coffee business; the ~$400M of announced cost synergies showing up in segment margins; green coffee cost normalising so U.S. Coffee stops losing margin; deleveraging toward the 4.1x year-end target. DOWN: the separation date slipping out of early 2027 (our model discounts a 2027 sum-of-the-parts back to today); U.S. Coffee adjusted operating income staying down double digits after -24.7% this quarter despite +5.0% price; the year-end leverage ratio missing 4.1x; and the quiet one - structured payables went from $25M at Dec 31 to $1,018M at Jun 30, and if that supply-chain financing reverses it comes straight out of operating cash flow. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.