Keurig Dr Pepper Inc. (KDP): what the price requires

The current priced-in claim for Keurig Dr Pepper Inc. (KDP) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/KDP

Headline

FieldValue
TickerKDP
CompanyKeurig Dr Pepper Inc.
Current price$31.24/sh
CompositionLRB 70% / K-Cup pods 23% / Appliances 4% / Other 3%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin today21.5%
Multiple paid20x operating income

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 6% cost of capital with 4% terminal growth over a 5-year stage (computed at the 6% minimum rate; the CAPM rate 5.3% sits below it).

Reconcile: at the x-ray's 9.3% required return this reads ~16.7%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.74σ
cohort percentile (of 69 peers)57
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.44x5expensive
Earnings2.14x3expensive
Relative1.23x5expensive
Growth0.96x5justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.2%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$26.021.20xyesFCF base $1.7B, growth 9% (input: historical growth), terminal g 4.0%, WACC 7.1%, 6yr projection
DCF Exit MultipleGrowth$35.420.88xyesExit EV/EBITDA: 16.7x / 18.7x / 20.7x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$25.461.23xyesP/E 22x (static sector reference · 2026-04), scenarios: 18.4x / 22.0x / 25.6x (bear / base = reference held flat / bull), EV/EBITDA 14x
Simple DDMGrowth$49.130.64xyesDPS $0.92, g=7.3% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$32.450.96xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$14.522.15xyesBV/sh $18.52, ROE (TTM) 7.3%, ke 9.3%
Two-Stage Excess ReturnAsset$12.792.44xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$26.881.16xyesRev $16.9B, growth 9% (input: historical growth; tapered), Terminal P/S: 2.1x / 2.5x / 2.9x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$47.250.66xyesEPS $1.35, growth 35% (input: historical EPS growth), PEG=0.66 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$4.407.10xyesNormalized EBIT (5y avg op income, one-time charges added back) $3.00B × (1−24%) / WACC 7.1% → EPV (no growth)
Residual IncomeAsset$12.532.49xyesBV $18.52 + 5yr PV of (ROE (TTM) 7.3% − Kₑ 9.3%) × BV; BV grows 4.7%/yr
Graham NumberAsset$23.721.32xyes√(22.5 × EPS $1.35 × BVPS $18.52) — Graham's conservative floor
EV/EBITDA RelativeRelative$18.571.68xyesEBITDA $3.64B × sector EV/EBITDA 14.0x
FCF YieldEarnings$0.013123.50xyesFCF $1581.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF YieldEarnings$0.013123.50xyesSBC-adj FCF $1.48B (FCF $1.58B − SBC $0.10B) capitalized at Kₑ (excluded from median)
Ben Graham FormulaEarnings$43.560.72xyesEPS $1.35 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$2.9110.73xyesBV $18.52 × (ROIC 1.1% / WACC 7.1%)
P/Sales SectorRelative$24.851.26xyesRevenue $16.94B × sector P/S 2.0x
PEG Fair ValueRelative$50.630.62xyesEPS $1.35 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$14.592.14xyesEPS $1.35 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$27.8b
Net debt / NOPAT (after-tax)10.66x
Net debt / operating income (pre-tax)8.06x
Share count CAGR (buyback)-1.2%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

The useful way into this stock is to weigh what the market is pricing against what the business is actually showing, and right now the two are reasonably aligned. The price implies modest, mid-single-digit growth in operating profit, which is roughly what a mature beverage company with pricing power can deliver, and the first quarter backed it up: revenue grew to nearly $4.0 billion, EPS of $0.39 beat estimates, and the engine was the US beverage business, where refreshment beverages grew 11.9% on favorable pricing and solid demand. The market is not paying for a growth miracle; it is paying for steady, defensible compounding, and the company is delivering it.

The beverage side is the quality core. Dr Pepper and the broader carbonated soft-drink portfolio operate on a concentrate model, where the company manufactures concentrate that is "sold as a packaged beverage to retailers" or turned into syrup shipped to fountain customers, an asset-light, high-margin structure that throws off cash. The Keurig coffee system adds a razor-and-blade dynamic: the company "regularly launch[es] new brewers with new features and benefits" to expand the installed base, and each brewer pulls recurring K-Cup pod demand behind it. Coffee innovation is working, with Lavazza K-Cup sales growing over 50% and a new Keurig Alta system launching direct-to-consumer later this year.

The trailing operating margin near 21% reflects the strength of those two franchises, and the valuation is supported on the lenses that matter for a consumer staple. Peer-multiple and growth-DCF methods land at or above the price, consistent with a business whose value lives in durable brands and recurring consumption rather than in book assets. The company continues to retire shares modestly and pay a dividend. For an investor seeking defensible cash generation, a beverage-and-coffee portfolio with pricing power, recurring pod demand, and a price that asks only for ordinary growth is doing the steady work that consumer compounders are bought for.

Bear Case

The bear case is about capital allocation, and the JDE Peet's acquisition is the centerpiece. KDP took on an enormous amount of debt to buy a global coffee business, and the balance sheet now reflects it: net debt of roughly $28 billion sits near 8 times trailing operating income, a level of leverage that turns a defensive consumer name into a far riskier one. The immediate costs are visible, with the company expecting roughly $190 million in pretax coffee joint-venture costs for the balance of 2026 and integrating over 20,000 new employees. The question every shareholder should ask is whether management is creating value with this deal or empire-building: a debt-funded acquisition of a coffee business in a market where coffee economics are already challenged is exactly the kind of capital-allocation decision that can dilute returns for years if the synergies disappoint.

The coffee economics themselves are a structural headwind. The company's filing flags the volatility directly: high-quality coffee "tends to trade on a negotiated basis at a premium above the C price of coffee", a premium that can vary significantly with supply and demand, and coffee prices are exposed to weather, climate change, disease, and agricultural uncertainty. By doubling down on coffee, KDP has increased its exposure to a commodity it cannot control, at a time when input-cost inflation already pressures margins across the portfolio. The Keurig single-serve system also faces its own maturity and private-label competition on pods, the high-margin part of the model.

That combination, heavy leverage, increased commodity exposure, and a large integration, is what the valuation has to absorb. The price is supported on relative and growth methods, but the asset-value and earnings-power lenses read it as expensive, with the zero-growth earnings lens at less than half the price. The bear reading is that a consumer staple priced for steady compounding now carries an acquisition-sized debt load and a commodity-cost risk that the steady-compounder framing understates. If integration costs run long, if coffee prices spike, or if the planned reorganization of the combined business proves messy, the leverage leaves little room, and the market may re-rate the name from a defensive holding to a leveraged turnaround.

Valuation

The price asks for ordinary growth, which is the right starting point for a mature beverage company. At roughly 20 times company-wide operating income, the embedded assumption is modest mid-single-digit operating growth, within range of what the business can plausibly deliver and consistent with the 4% to 6% constant-currency growth management guides for the legacy business. This is not a stretched growth bet; it is a steady-compounder valuation.

The methods divide along the usual line for a brand-driven staple. Peer-multiple and growth-DCF approaches justify the price, while the asset-value and earnings-power methods read it as expensive, the zero-growth earnings lens at under half the price. That pattern is expected for a business whose worth lives in brands and recurring consumption rather than on the balance sheet: capitalize today's profit with no growth and the number looks rich; value it against beverage peers and credit ongoing growth, and the price holds. A reader should treat the spread as confirming a quality-and-growth premium rather than a mispricing.

Where the valuation analysis gets serious is solvency, and here the JDE Peet's acquisition changes the picture materially. Net debt near $28 billion at close to 8 times trailing operating income is a heavy load for a consumer company, and it converts what was a low-risk balance sheet into a meaningful constraint. The trailing operating margin near 21% supports servicing that debt in normal conditions, but the leverage means the genuine downside is no longer just slower growth; it is the combination of an acquisition that must deliver its synergies, coffee-cost volatility, and a debt load that limits flexibility. The price is reasonable on the brands; the risk the valuation must carry now sits on the balance sheet.

Catalysts

The first quarter beat modestly and the company held its guidance. KDP reported revenue of about $4.0 billion and EPS of $0.39, ahead of the $0.38 consensus, driven by US refreshment beverages up 11.9% on favorable pricing and demand. For 2026 the company reaffirmed net sales of $25.9 to $26.4 billion and low-double-digit constant-currency adjusted EPS growth, comprising 4% to 6% net sales and EPS growth for the legacy business plus incremental contribution from JDE Peet's.

The defining corporate event is the JDE Peet's acquisition, which closed April 1, 2026, adding over 20,000 employees and combining the coffee portfolios, with roughly $190 million of pretax coffee JV costs expected for the balance of 2026. On the product side, Lavazza K-Cup sales grew over 50% and the Keurig Alta system is targeted for a direct-to-consumer launch later this year. The catalysts to track are the integration of JDE Peet's and the planned reorganization of the combined coffee business, coffee commodity prices given the increased exposure, and the pace of deleveraging from the post-acquisition debt load.

Peer Cohorts (Per Segment, With Filing Citations)

U.S. Refreshment Beverages (reported)

U.S. Coffee (reported)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 earnings release · Q1 2026 earnings call · Q1 2026 guidance

View the full interactive KDP report on boothcheck