Keurig Dr Pepper Inc.

Second-quarter consolidated net sales grew 74.6% year over year, reflecting the JDE Peet's acquisition, while legacy KDP net sales grew 7.3% with 4.2 percentage points from price and 3.1 points from volume mix. Consolidated gross margin was 46.5%, down 860 basis points from the prior year; excluding the acquisition impact, gross margin contracted 210 basis points. SG&A as a percent of sales declined 400 basis points, and operating income increased 42.9%; EPS rose 16.3% to $0.57. Free cash flow was $714 million in the quarter, and pro forma management leverage was 4.4x at quarter end. For full-year 2026, management reaffirmed net sales of $25.9 billion to $26.4 billion, including $8.5 billion to $8.7 billion from JDE Peet's, low double-digit constant-currency EPS growth, approximately $2.5 billion in free cash flow, and year-end leverage of about 4.1x. Legacy KDP is still expected to grow 4% to 6% in constant currency, with the high end now seen as most likely.

Tim Cofer struck an upbeat tone, saying the quarter was ahead of expectations and that the company remains on track for its 2026 goals and an early-2027 separation. He emphasized that the JDE Peet's close, the new interim operating model, and early synergy work are all progressing well. He also highlighted strong momentum in U.S. Refreshment Beverages, saying that segment remains a key growth engine, while describing U.S. Coffee as likely beginning to turn a corner in the back half.

Anthony DiSilvestro focused on the mechanics behind the quarter and the outlook. He cited consolidated gross margin of 46.5%, a 210 basis point decline in legacy KDP gross margin, $714 million of free cash flow, 4.4x pro forma leverage, and a full-year target of roughly $2.5 billion in free cash flow and 4.1x leverage. He also noted that guidance now includes an incremental 2% noncash EPS headwind from depreciation tied to purchase price allocation, offset by an anticipated one-time tariff refund benefit, leaving the full-year EPS outlook unchanged. On cost structure, he said the $400 million JDE Peet's synergy target remains intact and that benefits should build in the second half and beyond.

Analysts pressed for more color on the strength of U.S. Refreshment Beverages, the pace of the Global Coffee Co. CEO search, the path to coffee margin recovery, and the durability of JDE Peet's synergies in a volatile coffee market. Management said U.S. Refreshment's growth is being driven by CSD share gains, energy momentum, sports hydration, and better beverage trends, and expects growth to moderate in the back half as comps get tougher. On coffee, they pointed to easing input costs, better inventory flow-through, and improved pod and brewer trends as drivers of a stronger second half. On the CEO search and spin timing, Cofer said the process is well underway, has attracted strong interest, and they will not compromise on quality for speed.