Earnings season is in full swing and with each new release comes some more data points on both past and future results. On February 12th management at Dr. Pepper Snapple Group, Inc. (DPS) announced 4Q 2013 and full year results. Last week I looked through both The Coca-Cola Company's earnings report as well as PepsiCo, Inc. So why not go for the trifecta an get the third major player in the domestic soda market; and tear through Dr. Pepper Snapple Group's report and update their valuation. On Friday, February 21st, Dr. Pepper Snapple Group closed trading at $51.74 giving a forward dividend yield of 3.17%.
Analysts followed by Yahoo!Finance expect Dr. Pepper Snapple to grow earnings 6.90% per year over the next five years and I've assumed they can grow at 5.18% (75% of 6.90%) for the next 3 years and at 4.50% per year thereafter. Running these numbers through a three stage DCF analysis with a 10% discount rate and summing over 30 years yields a fair value price of $59.36. This means the shares are trading at a 12.8% discount to the discounted cash flow analysis.
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