Keurig Dr Pepper stock has its best day in 5 years: company raises $7 billion in investment

Shares of beverage maker Keurig Dr Pepper posted their best gain in five years on Oct. 27. It said it will receive a $7 billion investment from Apollo and KKR funds to buy the company, which owns the L'OR and Jacobs coffee brands. After that, Keurig plans to split into two separate businesses that will focus on sodas and coffee. Keurig also released a strong third-quarter report on Monday, which also supported investor optimism.

Soft drink maker Keurig Dr Pepper's shares were up 10.5% to $30 at the moment on Oct. 27. It became the biggest growth during one day since March 2020, Bloomberg noted. By the end of trading, the securities slowed slightly and added 7.6% in the end. Compared to the beginning of 2025, the company's securities are still down 9%.

The stock rose on Monday thanks to a reported investment in the company by Apollo and KKR funds, and after the release of its third-quarter earnings.

Keurig Dr Pepper, which produces coffee and carbonated beverage brands of the same name, has agreed to raise $7 billion in investment from Apollo and KKR funds. These funds will help finance the $18 billion purchase of Dutch coffee company JDE Peet's, which produces coffee and tea under the brands L'OR, Jacobs, Pickwick, Bloomberg reports.

Keurig announced plans for the deal in August. In October, TD Cowen analyst Robert Moskow warned that the takeover would likely increase Keurig's debt load and triple its dependence on the coffee segment, which investors, on the contrary, would like to see less important in the business structure, Bloomberg wrote. However, investments from Apollo and KKR should reduce investors' concerns about the growing debt load, the agency said.

Barclays analyst Lauren Lieberman estimates that thanks to the financing raised, the combined company will retain operational flexibility and will not suffer in market valuation, Bloomberg reports. Lieberman gave Keurig shares a neutral rating (Equalweight) on Monday.

Under the terms of the deal, Apollo and KKR will invest $4 billion in the coffee capsule joint venture, in which Keurig will retain a controlling stake. Another $3 billion will be invested in preferred convertible shares in Keurig's beverage division. According to CEO Timothy Cofer, the combined coffee company will generate $16 billion in revenue and $3 billion in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), Bloomberg reports.

The company plans to split its beverage and coffee businesses into two independent companies by the end of 2026. The new financing structure will reduce Keurig's expected net debt after the deal closes to $31 billion from the previously estimated $38 billion, management expects. This will reduce the debt-to-earnings ratio (debt to earnings) from 5.6 to 4.6, Bloomberg calculates.

Keurig also reported on Monday that its adjusted EPS for the third quarter was $0.54 - exactly in line with the forecast of analysts at Visible Alpha, Investopedia writes. Revenue rose 10.6% to $4.31 billion, beating market expectations. This was due to strong beverage sales in the U.S. and the acquisition of the Ghost energy drink brand, the publication explains. The company was successful in implementing its strategy of accelerated growth in the domestic market and strengthening its coffee and refreshment segments, Investopedia added.

Sales of refreshing beverages in the U.S. rose 14.4% to $2.7 billion. U.S. coffee sales rose 1.5% to $991 million, driven in part by higher prices for K-Cup coffee capsules for coffee machines. The company said the Ghost deal added 4.4 percentage points to volume and product mix growth.

Keurig Dr Pepper now expects annual revenue growth in constant currency to be in the "high single digit percentages" (approximately 7-9%), whereas previously growth was forecast to be in the "mid single digits" (4-6%).

This article was AI-translated and verified by a human editor