UPDATE 4-Dr Pepper Snapple profit tops view; outlook raised

Thu Aug 13, 2009 12:54pm EDT

* Q2 EPS 62 cents tops Wall Street view of 50 cents

* Q2 net sales down 4 pct to $1.48 billion

* Sees '09 EPS $1.88-$1.96; Prior view $1.70-$1.78

* Sees Snapple volume growing by end of year

* Shares up 4.85 percent after steeper rise (Adds executive comments, byline, updates stock activity)

By Martinne Geller and Jessica Wohl

NEW YORK/CHICAGO, Aug 13 (Reuters) - Dr Pepper Snapple Group Inc (DPS.N) reported a much higher-than-expected jump in quarterly profit on Thursday and raised its full-year outlook, citing lower costs for packaging and ingredients.

The company's higher-end noncarbonated drinks continued to suffer as consumers cut back. Snapple's volume fell 15 percent on the heels of a 22 percent drop in the first quarter.

Still, the company expects Snapple to post volume growth by the end of this year, said Chief Executive Larry Young during a conference call. Dr Pepper Snapple has been heavily promoting its reformulated premium iced tea.

Overall, volume rose 4 percent in the United States and Canada, and Dr Pepper's soft drinks gained market share, helped by the addition of the flavored Dr Pepper Cherry.

Young did not say much about the impact his company could feel from PepsiCo Inc's (PEP.N) pending purchase of its major bottlers, Pepsi Bottling Group Inc PBG.N and PepsiAmericas Inc PAS.N. Some of Dr Pepper's drinks are distributed by Pepsi bottlers.

Young said it would be premature and inappropriate to comment on Pepsi's deal now, but said his company is reviewing a number of possible strategic options.

Shares of the maker of Sunkist, 7UP, Canada Dry and A&W sodas were up 4.85 percent at $24.66 after rising to $25.47.

PROFIT UP DESPITE SALES DECLINE

Net income increased to $158 million, or 62 cents per share, in the second quarter, from $108 million, or 42 cents per share, a year earlier.

Analysts on average were expecting 50 cents per share, according to Reuters Estimates.

Stifel Nicolaus analyst Mark Swartzberg raised his 12-month price target on the shares to $27 from $23. He said the better-than-expected results came largely from margin improvements.

Dr Pepper Snapple's report follows better-than-expected quarterly results from larger rivals Coca-Cola Co (KO.N) and PepsiCo.

Net sales fell 4 percent to $1.48 billion. Excluding the impacts of currency fluctuations and lost sales from no longer distributing Hansen Natural Corp HANS.O drinks, sales rose 3 percent, helped by price increases and a 3 percent gain in volume.

Dr Pepper has been selling more cold drinks and is working on other ways to expand its reach. By the end of 2010, regular Dr Pepper will be sold as a fountain drink in all U.S. McDonald's Corp (MCD.N) restaurants, while Diet Dr Pepper will be in half of those locations.

Volume rose 4 percent for Dr Pepper and fell less than 1 percent for 7UP, Canada Dry and A&W. Sunkist volume declined at a high-single-digit percentage rate.

The company now sees 2009 earnings of $1.88 to $1.96 per share, excluding items, up from a prior forecast for $1.70 to $1.78 and ahead of the analysts' average expectation of $1.77.

The new outlook reflects lower costs, a reduction in the company's full-year tax rate and certain investments in the second half of the year. Dr Pepper also said it expected to reduce its debt obligations by at least $475 million this year, $75 million more than it previously anticipated.

The company still forecasts a full-year sales decline of 2 percent to 4 percent. (Reporting by Martinne Geller in New York and Jessica Wohl in Chicago; Editing by Lisa Von Ahn and Gunna Dickson)

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