11:13 AM EDT, 04/01/2025 (MT Newswires) -- Keurig Dr Pepper ( KDP ) growth potential exceeds consumer packaged goods peers and its valuation does not fully reflect the expected sustained growth in the US refreshment and international segments, Morgan Stanley said in a note on Tuesday.

The firm said that Keurig Dr Pepper's ( KDP ) refreshment segment outperforms peers due to superior pricing power and market share gains with 6.5% year-over-year growth in Q1 to-date, driven by favorable consumer trends, innovation and competitive positioning.

The international segment showed stable growth, despite being a smaller portion of total profits, according to the note. Excluding temporary hyperinflation benefits that have skewed peer comparisons, the company's organic sales growth has outperformed competitors because of volume and mix improvements.

Keurig Dr Pepper's ( KDP ) coffee business has struggled as profits dropped 14% over the past three years and near-term downside is expected due to higher coffee costs and lagged pricing amid improvement in volume and mix, Morgan Stanley added.

The firm upgraded its rating on the company's stock to overweight from equal weight and raised the price target to $40 from $38.

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