Dr Pepper profit beats Street view

By Dhanya Skariachan

BANGALORE (Reuters) - Dr Pepper Snapple Group Inc (DPS.N) reported a higher-than-expected quarterly profit and raised its 2009 forecast on Wednesday as consumers looking to curb spending choose its lower-priced soft drinks.

While demand for its value-priced drinks like Crush and Hawaiian Punch has been strong during the recession, the company's more expensive brands -- particularly Snapple -- have suffered as consumers cut back.

Shares of Dr Pepper, whose other brands include A&W, 7UP and Canada Dry, were up 2 percent in afternoon trading after jumping 8.4 percent earlier.

Dr Pepper, which was separated last year from British confectionary company Cadbury Plc (CBRY.L), is the third-largest soft-drink maker in the United States behind Coke and Pepsi. It has increased its U.S. market share and is trying to grow through increased marketing and expanded distribution.

For example, the company is rolling out more vending machines and coolers and is touting the value of its Hawaiian Punch in the weak economy. It has also restaged Snapple as a premium drink made with natural ingredients, though that effort came at a tough time as premium drinks have suffered.

Chief Executive Larry Young declined to speculate on the industry impact of PepsiCo Inc's (PEP.N) plan to buy bottlers Pepsi Bottling Group Inc (PBG.N) and PepsiAmericas Inc (PAS.N). On a conference call, Young did say a flexible route to market is "paramount."

Dr Pepper does not have a decentralized system like the ones currently used by Coca-Cola Co (KO.N) and PepsiCo. Dr Pepper's Crush drink is distributed by Pepsi bottlers.

The company expects to see a return to growth in Snapple later this year, executives said during the call.

Young said he had good expectations for Memorial Day, a holiday this month that unofficially kicks off the summer, a key season for beverage sales.

First-quarter net income rose to $132 million, or 52 cents a share, from $95 million, or 38 cents a share, a year earlier.

Excluding one-time items such as gains from the termination of a distribution deal with Hansen Natural Corp (HANS.O), profit was 37 cents a share. That compares with analysts' average forecast of 29 cents, according to Reuters Estimates.

Stifel Nicolaus analyst Mark Swartzberg, who has a "buy" rating on Dr Pepper stock, lauded the performance of the company's carbonated soft drinks.

Net sales fell about 3 percent to $1.26 billion.

For the full year, Dr Pepper said it expected earnings of $1.70 to $1.78 a share, up from a prior forecast of $1.59 to $1.67. The company stood by its outlook for a 2009 sales decline of 2 percent to 4 percent.

Dr Pepper shares were up 2 percent at $21.68 in afternoon trading on the New York Stock Exchange after rising as high as $23.05. The stock is up from an all-time low of $11.83 touched in early March.

(Reporting by Dhanya Skariachan, additional reporting by Jessica Wohl in Chicago; Editing by Lisa Von Ahn, John Wallace, Tim Dobbyn)