Key Takeaways
- Ilex Capital Partners, a fund with $5.15 billion of US stocks, sold its whole stakes in Keurig Dr Pepper, Yum! Brands and Philip Morris International in the third quarter, its 13F shows.
- Each stake was about 3% of the fund at June 30. Keurig Dr Pepper and Philip Morris have each risen 10% or more since Sept. 30.
- For all three stocks, Wall Street’s average price targets are only 5% to 9% above the latest close.
- Keurig Dr Pepper has the best case of the three: adjusted EPS rose 22.2% last quarter, and the stock trades at 15x forward earnings.
A $5.2 billion fund just walked away from three of the best-known names in consumer stocks: Keurig Dr Pepper (KDP), Yum! Brands (YUM) and Philip Morris International (PM).
Ilex Capital Partners (UK) held all three at June 30 and none at Sept. 30, according to its 13F for the quarter ended Sept. 30, filed Nov. 13. The filing lists $5.15 billion of US stocks across 252 positions. Each of the three was about 3% of the portfolio a quarter earlier. A 13F doesn’t say when in the quarter a fund sold, or why.
Keurig Dr Pepper kept delivering
Ilex’s 4.97 million Keurig Dr Pepper shares were worth $163 million at June 30, 3.3% of the fund. The stock is up 11% since Sept. 30, and the third quarter gave investors plenty to like. Leaving out JDE Peet’s, which Keurig Dr Pepper bought on April 1, net sales rose 8.6%. Adjusted EPS jumped 22.2% to $0.66, the company said in its Nov. 3 release, and management reaffirmed its full-year guidance.
Analysts have been raising their targets since the spring:
The average target from 19 analysts has climbed from a low of $33 in April to $38, just 5% above the latest close. At 15x forward earnings, that’s still a modest price for a business growing like this.
TIKR tracks 19 analysts on Keurig Dr Pepper. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Keurig Dr Pepper, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Keurig Dr Pepper’s Analyst Ratings
Yum! Brands needs Taco Bell back on track
Yum! Brands hasn’t had the same run. Ilex held 1.02 million shares at June 30, worth $162 million and 3.3% of the fund. The stock is up just 0.9% since Sept. 30. Ilex didn’t give up on restaurants, though: at Sept. 30 it held 50% more Chipotle Mexican Grill shares than three months earlier, which made Chipotle the fund’s No. 4 holding.
Taco Bell is Yum’s problem. Its U.S. same-store sales fell 4% in the third quarter, after a 7% gain a year earlier. CEO Chris Turner said Taco Bell’s U.S. same-store sales have beaten the rest of the quick-service industry since the end of September. Yum’s fourth-quarter report, due early next year, will show whether that held up.
Analysts have been more upbeat than the stock:
The average target from 25 analysts rose from $165 a year ago to $175, 9% above the latest close. But at 25x forward earnings, investors are already paying for a recovery Taco Bell hasn’t delivered yet.
Philip Morris has already had its run
Philip Morris International is the other sale that kept climbing, up 10% since Sept. 30. Ilex held 804,943 shares at June 30, worth $146 million and 3.0% of the fund.
The company beat on its third quarter, then gave some of the gain back on a 25% price cut for Zyn. Even so, the stock has gone from $155 a year ago to $199 at the latest close, and Wall Street has raised its targets along the way:
The average target from 17 analysts rose from $183 to $212 over the year. That’s 7% above the latest close, with the highest target at $240 and the lowest at $175. At 23x forward earnings, a lot of the good news already looks priced in.
Keurig Dr Pepper is the sale I’d second-guess
What the three sales have in common now is limited upside: Wall Street’s average targets are only 5% to 9% above their latest closes.
If I could only buy one of the three back right now, it’d be Keurig Dr Pepper. Its adjusted EPS grew 22.2% last quarter, management stuck with its guidance, and at 15x forward earnings it has the lowest multiple of the three.
Of course, Keurig Dr Pepper still has to split into two companies, and CEO Tim Cofer says it’s “stepping up investment” to get ready. Ilex’s next 13F is due in mid-February, and it will show whether the fund bought any of the three back.
So what is Keurig Dr Pepper stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
