Dr Pepper Tackles Higher Costs With Price Hikes

PLANO, Texas ( TheStreet) -- Dr Pepper Snapple ( DPS) beat profit expectations by a penny as sales increased, though top-line revenue missed analysts' consensus and the company said it would raise prices to keep up with higher costs and a tough consumer spending environment.

Dr Pepper Snapple posted quarterly earnings per share of 77 cents, up from 74 cents earned in the year-earlier period, beating expectations by a penny.

Net revenue increased 3.9% to $1.58 billion from $1.52 billion, but the line item missed analysts' call for sales of $1.59 billion.

Dr Pepper Snapple said it would raise prices and push for greater productivity in an effort to cover higher input costs. It expects its cost of goods sold (COGS) to grow between 7% and 9% in fiscal 2011.

Dr Pepper Snapple forecast full-year EPS in the $2.70 to $2.78 range, with net sales to increase 3% to 5% to a range of $1.45 billion to $1.48 billion. That compares with analysts' expectations for 2011 EPS of $2.75 on revenue of $5.92 billion.

Dr Pepper Snapple shares were 0.2% higher in premarket trading Wednesday after closing 0.2% lower at $39.64 in Tuesday's session.

Rival PepsiCo ( PEP) matched quarterly profit expectations last week and also said it would raise prices again as costs and weaker consumer spending pressured results.

Coca-Cola ( KO) also raised consumer prices in the recent quarter as costs for packaging, sweeteners and other ingredients continued to rise.

As of earlier this year, Pepsi had been able to better manage the risk of rising commodity costs than Coca-Cola, Pepsi had turned to improved operational efficiencies and price increases to help offset those costs, but CFO Hugh Johnston conceded in April that pricing in the first half of the year "has not been what we would have liked or expected."

Costs for plastic bottles and fuel to transport beverages has risen as oil prices heated up this year. Oil prices affect the price of polyethylene terephthalate, or PET, the plastic used by beverage companies to make soda bottles. Coke, Pepsi, Dr Pepper Snapple and other beverage makers cannot hedge the prices they pay for PET because the material is not traded like other commodities.

>>For upcoming earnings and estimates, see our Earnings Calendar.

-- Written by Miriam Marcus Reimer in New York.

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