Insider Weekends: New CFO Of Keurig Dr Pepper Purchases Shares

One of the largest beverage companies amongst the likes of Coca-Cola (KO), Keurig Dr Pepper (KDP) is a drink focused conglomerate which owns recognizable brands such as Snapple, 7UP, Dr. Pepper and Keurig. The company was formed through the merger/acquisition of the publicly traded Dr Pepper Snapple Group by the privately held Keurig Green Mountain for $18.7 billion. At the time, Keurig Green Mountain was owned by the investment firm JAB, which had taken Keurig private in March 2016 for $92 per share, or a total of $13.9 billion.

Investors who have been actively investing during the last decade might recollect how Keurig Green Mountain used to trade at a significant premium and was a favorite of short sellers. Unfortunately JAB’s acquisition was a blow to short sellers and remains one of the key risks they must contend with. Keurig Green Mountain remained private for only two years before going public again through the Dr Pepper Snapple Group and JAB remains the majority shareholder in the combined company. JAB Holding has built an impressive portfolio over the years, as it either owns or has a majority stake in companies such as Panera Bread, Krispy Kreme, and Peet’s Coffee. As is common with private equity related companies, Keurig Dr Pepper has a leveraged balance sheet with nearly $12.5 billion in net debt.

Keurig Dr Pepper derives their revenue from four different operating segments: Coffee Systems, Packaged Beverages, Beverage Concentrates, and Latin America Beverages. The Coffee Systems segment is primarily responsible for the manufacturing and sale of “K-Cup Pods” (single serve coffee or other beverage pods used in the Keurig brewing machines) as well as the actual Keurig Coffee Makers. Keurig Dr Pepper is partnered with a range of brands outside of their own, such as Starbucks (SBUX) or the hot cocoa mix Swiss Miss from Conagara Brands (CAG), to incorporate drinks from those businesses into the K-Cup Pods for consumer use. The pods are then sold to retailers all over North America, and as of 2021, Costco (COST) and Walmart (WMT) were two of the Coffee Segment’s largest customers.

The Beverage Concentrates and Packaged Beverages segments are rather similar, with the Beverage Concentrates segment covering the manufacturing and sale of beverage concentrates used to make Keurig Dr Pepper’s various drinks, and these concentrates are then either sent to third party bottlers or manufacturing facilities or sold to third party retailers for use in fountain drinks. The Packaged Beverage segment is where all operations relating to the actual manufacturing, bottling, and sale of the drinks themselves, with Walmart (WMT) being this segment’s largest customer as well. The Latin America Beverages segment covers all operations that occur in Latin America, with business operations in Mexico specifically representing 90% of the segment’s net sales. Once again, Walmart (WMT) is this segment’s largest customer.

2021 marked not only the end of the three year merger integration period, but was also a great year financially for Keurig Dr Pepper. Net sales, gross profit, operating income, and net income all increased YoY, with net income specifically growing by 62%. On November 15, 2021, Coca-Cola acquired the drink company BodyArmor, and from this acquisition, Keurig Dr Pepper received $576 million in cash proceeds from selling their equity interests in Body Armor to Coca-Cola. In the fourth quarter of 2021, Keurig Dr Pepper also authorized a share repurchase program of around 8% of their market cap, which would go into effect from January 1, 2022 onwards.

While Q4 2022 results are yet to be released (results are to be announced on February 23, 2023), we can look to Q3 results to see how the company has been performing. Net sales increased by 11.4% QoQ to roughly $3.6 billion and gross profit also increased by 3.6% to around $1.9 billion. However, both income from operations and net income took large hits, primarily due to a goodwill impairment charge of $311 million from one of Keurig Dr Pepper’s brands Bai, as well as increased SG&A expenses. Nevertheless, throughout 2022, the company announced many strategic partnerships with brands such as Nutrabolt and Red Bull, and also acquired the non-alcoholic cocktail brand Atypique for $30 million.

This week’s insider purchase was made by CFO Sudhanshu Shekhar Priyadarshi, who joined the company as recently as November 2022. Prior to this role, Mr. Priyadarshi served as the CFO at Vista Outdoor (VSTO), but has also worked with large corporations such as Walmart (WMT) and PepsiCo (PEP) in various finance positions. This is the first insider purchase that we’ve seen in a few months from any insider at Keurig Dr Pepper. The CEO and Executive Chairman has actually been selling as part of a 10b-5 trading plan. The stock was down 9% over the last year and sports a 2.3% dividend yield. While the company is interesting, the high debt and the fact that it trades at 27 times earnings gives us pause.

Welcome to edition 656 of Insider Weekends. Insider buying declined last week with insiders purchasing $8.84 million of stock compared to $13.07 million in the week prior. Selling also declined to $465.61 million compared to $747.95 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week dropped to 52.67. In other words, insiders sold almost 53 times as much stock as they purchased. The Sell/Buy ratio this week was favorable compared to the prior week when the ratio stood at 57.21.

Notable Insider Buys:

1. EOG Resources, Inc. (EOG): $132.75

Director Michael T. Kerr acquired 20,000 shares of this independent oil & gas company, paying $130.49 per share for a total amount of $2.61 million. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for EOG Resources, Inc. here.

2. Applied Digital Corporation (APLD): $2.4

CEO; Chairman Wes Cummins acquired 200,000 shares of this datacenter operator, paying $2.26 per share for a total amount of $452,750. These shares were purchased indirectly by B. Riley Asset Management, LLC.

You can view the list of recent insider transactions for Applied Digital Corporation here.

3. Guaranty Bancshares, Inc. (GNTY): $34.36

Director Richard W. Baker acquired 11,629 shares of this bank holding company, paying $34.49 per share for a total amount of $401,084. Mr. Baker increased his stake by 1.84% to 644,500 shares with this purchase.

You can view the list of recent insider transactions for Guaranty Bancshares, Inc. here.

4. Coinbase Global, Inc. (COIN): $55.16

Director Tobias Lutke acquired 6,834 shares of this cryptoeconomy focused broker, paying $54.21 per share for a total amount of $370,471. These shares were purchased indirectly by 7910240 Canada Inc.

You can view the list of recent insider transactions for Coinbase Global, Inc. here.

5. Keurig Dr Pepper Inc. (KDP): $34.71

Chief Financial Officer Sudhanshu Shekhar Priyadarshi acquired 10,000 shares of this beverage company, paying $35.00 per share for a total amount of $350,000.

You can view the list of recent insider transactions for Keurig Dr Pepper Inc. here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. DocuSign, Inc. (DOCU): $56.51

Director Daniel D. Springer sold 294,018 shares of this e-signature solution provider for $58.30, generating $17.14 million from the sale.

You can view the list of recent insider transactions for DocuSign, Inc. here.

2. NVIDIA Corporation (NVDA): $178.39

Director Mark A. Stevens sold 65,000 shares of this semiconductor company for $165.54, generating $10.76 million from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for NVIDIA Corporation here.

3. Bowlero Corp. (BOWL): $14.4

Shares of this bowling entertainment center were sold by 2 insiders:

• Chief Executive Officer Thomas F. Shannon sold 567,145 shares for $13.81, generating $7.83 million from the sale.
• Chief Financial Officer Brett I. Parker sold 30,000 shares for $14.00, generating $420,000 from the sale.

You can view the list of recent insider transactions for Bowlero Corp. here.

4. Horizon Therapeutics Public Limited Company (HZNP): $113.02

Shares of this biotech company were sold by 2 insiders:

• EVP, Chief Financial Officer Aaron Cox sold 36,148 shares for $113.17, generating $4.09 million from the sale.
• EVP, Chief Strategy Officer Andy Pasternak sold 27,129 shares for $113.03, generating $3.07 million from the sale.

You can view the list of recent insider transactions for Horizon Therapeutics Public Limited Company here.

5. Interactive Brokers Group, Inc. (IBKR): $78.92

Chairman Thomas Peterffy sold 80,000 shares of this investment brokerage for $77.98, generating $6.24 million from the sale.

You can view the list of recent insider transactions for Interactive Brokers Group, Inc. here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer: Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.