Evercore Says It's 'Not Too Late To Call The Dr.' Amid Dr Pepper Snapple Upgrade

• In a report issued Sunday, Evercore ISI upgraded shares of Dr Pepper Snapple Group Inc. (NYSE: DPS) from Hold to Buy.
• The firm set a $92 target price for the stock.
• Shares of Dr Pepper Snapple were up about 3 percent on Monday.

According to analysts Robert Ottenstein and Brendan Metrano, it seems like Dr Pepper Snapple can continue to outperform its peers and the market as it “looks uniquely positioned to benefit from the muted macroeconomic outlook, its U.S.-centric geographic profile, and industry/competitive trends.”

The analysts think the company is likely to beat consensus estimates for the third quarter (which will be reported on October 22) by at least $0.03 and to raise guidance. Consequently, the firm boosted its 2015 earnings estimate from $3.95 per share to $4.02 per share. The report notes that Richard Ross, Evercore ISI’s Head of Technical Analysis, also arrived at a $92-$93 price target – independently from the analysis above.

The research note points out three more issues to consider:

1) Dr Pepper Snapple is still a contrarian call, with only 13 percent Buy recommendations, versus 74 for Monster Beverage Corporation (NASDAQ: MNST), 63 percent for PepsiCo, Inc. (NYSE: PEP), and 56 percent for The Coca-Cola Co (NYSE: KO).

2) Evercore analysts expect continued “beats and raises” on ~10 percent EPS CAGR over the 2014-2017 timespan, versus the consensus growth estimate of 8 percent.

3) Management is shareholder-friendly and the company is one of few in its industry with a market capitalization below $30 billion that doesn’t have controlling shareholders. About a year ago, Dr Pepper Snapple “amended its By-laws for exclusive forum status. DPS’s ‘free’ status puts a floor under the stock, in our view,” the analysts add, “but our rating is not predicated on a takeout. Based on our analysis of Suntory Holdings’ balance sheet, the firm could make an offer for DPS after 2017.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.