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Varchild2008 (84.15)

Lowering Opinion from Strong Buy to Hold (DPS)



September 22, 2009 – Comments (1) | RELATED TICKERS: DPS

Eyeballing the stock and seeing YET ANOTHER 52-week high closing price struck...

One has to wonder... Where should the DPS price be if I was GOD trading at prior to Q3 earnings report?

The truth is that exactly $28.00 a share is probably the pivot point.  Any higher and I do not see how this doesn't drop even on a massive earnings beat.

There's pricing IN an earnings beat.... and then there is pricing OVER the earnings beat.

In order to ensure the investment community does not end up with a share price that prices in MORE than the actual earnings beat's earnings are....$28.00 is the pivot point.  I usually go with a 25 cent pivot.  $28.25  $27.75.  That range is a good range going forward into earnings.

Unfortunately... There are complications....messy.. That make me unable to figure out DPS.

A)  I am leaning towards a decline in momentum from CRUSH brand going forward.  I don't expect the same type of huge growth going forward that we have seen this year...

Why?  Total absence of Sugar-less Crush combined with customers buying the 2-liter Crush over the 6 Pack Glass Bottle version..... The 6 Packs have greater Margins....

B)  Snapple sales should year....  I strongly stick by my JUNE was SNAPPLE's Bottom theory.

C)  Dr. Pepper + Diet Dr. Pepper should see a nice 4% spike in volume sales going forward...maybe more....due to a massive amount of publicity.. I mean the drink is in Cowboy's Stadium's Party Booth...That's just cool factor...all over.

But then there is D..... Orangina.... What the heck is that???  You got a company buying ORANGINA.. Not from (DPS) which shows on their website that Orangina is one of their brands.... But from some LION, What's-it-Group....  Oragina Schweppes... They own Schweppes Ginger Ale as well?

My best guess is that this only impacts the European Sales of the Beverage.. That DPS still owns Schweppes and Orangina's North American business.  Some aspect of it at least.

Speculation could theoretically push DPS higher if someone out there thinks the North American portion of Schweppes and Orangina gets sold off..... That would pay down huge chunks of DPS Debt on the Balance Sheet if so...

DPS (to put it better)  has 3  Ginger Ales... Canada Dry + Vernors + Schweppes... They could easily SELL OFF 1 of them and not hurt themselves that badly going forward... 

As  a shareholder of DPS... I may be tempted to vote YES if such a thing was put to a shareholder vote to sell off one of the brands to a foreign company...  I'd say YES.... Clean up the balance sheet and focus more on a narrower portfolio of GINGER ALE..... why not?

It's great DPS has 50+ brands.. But you know what?  Just like operating in a smaller playground than COCA-COLA and PEPSI may be a good thing.....  So is shrinking the Portfolio to remove Debt and end up with a smaller portfolio... but Advertising out the portfolio becomes CHEAPER. 

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