KDP

We rate Keurig Dr Pepper Inc. (KDP) as a Hold with a composite score of 54.3/100 at a current price of $30.98. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (92th percentile) and value (73th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (35th percentile) and investment (40th percentile) tempers our overall conviction. We assign a Narrow Moat rating (41/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Keurig Dr Pepper Inc. holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 54.3/100 places it at rank #1355 in our full 7,333-stock universe. With a $34.7B market capitalization, Keurig Dr Pepper Inc. operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 10%, though momentum at the 35th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 55% (+12.0pp vs sector) narrow to operating margins of 22% (+21.2pp vs sector) and net margins of 14.6%, yielding a gross-to-net conversion rate of 27%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $30.98, Keurig Dr Pepper Inc. appears undervalued relative to its fundamentals. Our value factor score of 73/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 17.1x (a 23% discount to the sector median of 22.3x), EV/EBITDA of 11.2x (near the sector median), P/B of 1.6x, P/S of 2.5x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Keurig Dr Pepper Inc.. The stock presents a balanced risk profile: significant leverage (116% debt-to-equity) and low beta of 0.20 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (116% debt-to-equity); low beta of 0.20 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 92th percentile and quality factor at the 53th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 55% provide a buffer against cost pressures; above-average stability (92th percentile) suggests predictable business dynamics; a 3.61% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Keurig Dr Pepper Inc.'s capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Keurig Dr Pepper Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Keurig Dr Pepper Inc. receives a Hold rating with a composite score of 54.3/100 (rank #1355 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 59/100.

Our analysis supports a neutral stance on Keurig Dr Pepper Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.