Dr Pepper faces lukewarm U.S. homecoming

By Martinne Geller - Analysis

NEW YORK (Reuters) - Dr Pepper Snapple Group Inc DPS_w.N shares will start trading in the United States this week, but Wall Street is not welcoming back the soft drink maker with open arms.

The Texas-based maker of Dr Pepper and Hawaiian Punch is being spun off from Britain's Cadbury Plc (CBRY.L: Quote, Profile, Research), which took it over in 1995. It will trade on the New York Stock Exchange under the ticker DPS (DPS.N: Quote, Profile, Research) starting on Wednesday.

"When issued" shares debuted last Monday at $29 but fell 11 percent by Friday, closing at $25.80. That was below expectations for trading above $30.

Analysts are skeptical about the prospects of the company, which lacks its own popular beverages in the sports and energy drink segments and gets most of its sales from the United States, where the economy is faltering, commodity costs are soaring and sales of traditional soft drinks are slipping.

David Liston, equity analyst with Barclays Wealth in London, said he would not recommend British clients keep their Dr Pepper shares after the spin-off.

"There are a few issues and nothing exciting which might overcome my reluctance to go into a New York-listed stock for U.K. shareholders," Liston said. He expressed concerns about the balance sheet strength, the turnaround of Snapple, whose sales have sagged for years, and the company's standing as a distant third behind Coca-Cola Co (KO.N: Quote, Profile, Research) and PepsiCo Inc (PEP.N: Quote, Profile, Research).

Coke had 43 percent of the U.S. carbonated soft drink market in 2007, while Pepsi had 31 percent, according to Beverage Digest. Dr Pepper had 15 percent, but that was up slightly, while the cola giants' shares were slightly down.

The company, most recently known as Cadbury Schweppes Americas Beverages, has cited its range of flavored sodas like Dr Pepper, Schweppes ginger ale and 7UP for outperforming the U.S. soft-drink market, whose volume shrank last year as health-conscious consumers choose drinks they see as healthier or more beneficial.