Keurig Dr Pepper Inc (NASDAQ:KDP) has been downgraded to a ‘Hold’ rating by Jefferies analysts, who cited uncertainties around the planned split with JDE Peet’s and potential integration risks associated with the combined businesses.
The broker noted that while both New BevCo and Global CoffeeCo are capable of delivering top-line and EBIT growth in 2026 and 2027, the scale of the merger, a heavy debt load, coffee price volatility, and the company’s new financing structure with KKR and Apollo “may hinder the direction of travel.”
The analysts added that uncertainties regarding split timing and Global CoffeeCo leadership make it “better to wait.” KDP and JDEP expect to be “operationally ready” for the split by the end of 2026, but Jefferies suggested that the actual separation is likely to extend into 2027 or later.
They highlighted that the combined company carries a heavy debt load of 4.6x EBITDA, with total 2024 revenues estimated at $25.6 billion, and said that “progress is unlikely to be linear and volatility could be high.”
Looking at historical precedents, the firm noted that corporate splits have typically taken around 16 months, with some exceptions. “The fastest occurred when Conagra spun off Lamb Weston in 12 months, others took 15 to 20 months,” the analysts wrote, citing SEC processing delays, tax rulings, Form 10 registration timing, and multi-exchange listings as potential factors affecting timelines.
On the business side, Jefferies described the soft drinks segment as a “bright spot,” projecting 10.7% organic sales growth and 8% EBIT growth in 2025.
The broker wrote that the underlying New BevCo could deliver 4% to 5% organic sales and EBIT growth in 2026 to 2027.
For the coffee business, despite “limited visibility and coffee price volatility,” JDEP has shown strong organic sales growth, with a five-year compound annual growth rate (CAGR) of 5% from 2019 to 2024, and is expected to deliver 3% organic sales and 5% EBIT growth annually in 2026 to 2027.
Jefferies concluded that while the underlying businesses could achieve top-line and EBIT growth of 3% to 5%, “there are a lot of moving parts, such as clarity on the split and integration risk.”
They further noted that high financing costs and coffee price volatility could increase near-term fundamental volatility.
The firm has a $12 price target on Keurig Dr Pepper, which traded hands at $28 on Wednesday.