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Keurig Dr Pepper (KDP) is nicely higher today after posting a strong Q3 and raising its FY25 outlook. Revenue rose 10.7% yr/yr to $4.31 bln, above expectations, while EPS was in line. The company now expects high-single-digit FY25 sales growth, up from mid-single digits, reflecting broad-based strength.

• U.S. Refreshment Beverages jumped 14.4% to $2.7 bln, driven by market share gains in soft drinks, energy, and hydration — and boosted by KDP's 60% stake in Ghost Energy.
• U.S. Coffee grew 1.5% to $991 mln, as price gains offset weaker volume/mix.
• International sales increased 10.5% to $580 mln, led by growth in Mexico mineral water and Canadian single-serve coffee.
• The Q3 report comes on the heels of big news announced in August when KDP announced plans to acquire Amsterdam-based JDE Peet's for €15.7 bln, which includes a plan to separate into two independent, yet to be named, US-listed publicly traded companies: Beverage Co. and Global Coffee Co.
• Investors do not seem too excited as the stock has since fallen more than 20%. KDP concedes that there has been a slowdown in the global coffee category post-COVID as category volume trends bottomed out in 2022. However, they have been stabilizing ever since and KDP is beginning to see signs of recovery.
• Besides the positive comments on coffee, investors are also bidding up shares on an announcement today of a $7 bln strategic investment co-led by Apollo and KKR to reduce projected net leverage at acquisition close. Taking on debt was another reasons investors were not excited about the JDE Peet deal, but this lessens those concerns.

Briefing.com Analyst Insight:

KDP's Q3 results and outlook hit the right notes for a stock that had been under pressure since the JDE Peet's deal announcement. The top-line acceleration, confident tone on coffee demand recovery, and the $7 bln equity injection to ease leverage concerns collectively reset sentiment. The proposed split into two focused public companies could unlock value if executed cleanly, though integration and separation risks remain. Still, this is a step in the right direction.