In the midst of the economic chaos created by the COVID-19 pandemic, a few companies appear set to prosper. Beverage manufacturer and distributor Keurig Dr Pepper (KDP 1.43%) announced on Thursday that it's reaffirming its previously issued 2020 guidance. The company scheduled a conference call with analysts for 2:30 p.m. EDT Thursday to discuss its earnings targets, and more importantly, to offer details about its plan for maintaining supply chains as consumer demand for its products rises.
In its press release, the company reiterated a range of 2020 guidance items, including adjusted diluted EPS growth of 13% to 15%, and net sales growth in 3% to 4% range. It also still intends to reduce its leverage ratio to something in the 3.5 to 3.8 range by the end of the year.
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Keurig Dr Pepper's sales volume looks likely to increase with the rise of at-home beverage consumption as business, government, public, and social activities are curtailed in the national effort to stem the spread of the novel coronavirus.
But perhaps less obvious is that among major beverage companies, Keurig Dr Pepper has an extremely attractive product mix for these extraordinary times. Roughly 38% of its revenue derives from its lineup of Keurig brewers and K-cups, which will surely see increased use by home-bound consumers. Bottled beverages likewise make up roughly 44% of its business. Beverage concentrates, which will likely see a slump in orders in the near term as restaurants and foodservice businesses experience sharp reductions in traffic, make up less than 13% of Keurig Dr Pepper's sales.
Based on this, it's reasonable to expect this consumer-oriented business will benefit from a tailwind for a few months in the least. The company now finds itself dealing with a good problem to have -- how to ensure it can push its products to distribution points to keep up with an expected surge in retail sales.
