The insider activity in Keurig Dr Pepper (NASDAQ: KDP) has been mixed since the first of the year, driving market volatility. A few insider sales, 1 specifically, sparked a correction in the stock but set up an opportunity for investors. The takeaway from the activity is that selling outpaces buying, but it’s a non-executive insider who’s selling, and the executive insiders are buying. The seller is Mondelez International (NASDAQ: MDLZ) which recently sold 30 million shares of the stock. That’s a whopper of a number and a reason why the price action has been depressed, but Mondelez still owns 45 million shares, and, as mentioned, the true insiders are buying.
Over the last 2 months, insiders like the CFO, some directors and a few minor execs have been buying the shares while Mondelez and its friendly director sell. They have grown insider holdings to 1%, and the institutions are also buying. The institutions, ex-Mondelez, own about 50% of the stock and have added to their positions over the past 2 years. Their activity surged in Q1 when KDP prices moved to a 6-month low, and it may surge again now that the price action has moved down to another new low.
The Analysts Are Capping Gains For Keurig Dr Pepper Stock
The analysts are still Holding the stock but are also helping to pressure it lower. Not only has the sentiment soured from Moderate Buy to Hold, but the price target is trending lower. The consensus is about 15% above the current price action but edging lower due to some new targets inspired by the Q1 earnings report. If this continues, the stock is unlikely to move higher in the near to short term.
The Q1 results were mixed, with earnings outpacing revenue on a recent round of price increases and revenue growth weak compared to competitors like The Coca-Cola Company (NYSE: KO) and PepsiCo (NASDAQ: PEP). The bad news is that volume was impacted by the higher prices and may lead to sluggish sales in Q2 and this year. Volume declined by 1% and was offset by a 9.9% price increase, meaning KDP growth is all inflation.
The company reiterated its revenue and earnings growth outlook in 2023, targets in line with the consensus figures, but it was not enough to inspire confidence in the stock. The risk is that sluggish sales and declining volume will persist into the 2nd half and lead to underperformance relative to guidance and consensus estimates.
Keurig Dr Pepper Is Value Or Deserves Its Value
Keurig Dr Pepper may offer value compared to competitors Coke and Pepsi, but you get what you pay for. While KO and PEP trade at 25X and 26X earnings compared to KDPs 18X, they sustain higher growth rates and significantly outperform on the top line. PepsiCo is leading the group because its diversification strategy in snacks and breakfast categories underpins growth and margin strength. It also saw a decline in volume but was able to post a 10% increase in YOY earnings, margin expansion and an increase in guidance.
The chart of KDP shows the market at the bottom and might be a buyable bottom. The risk is that price action will trend sideways at this level until later in the year or next year when (if) the economy perks back up. On the other hand, shares of Pepsico are trending higher and just broke out to a new high, suggesting more new highs are on the way.