Based in Texas, Dr Pepper Snapple Group Inc. (NYSE:DPS) is an American soft drink company. The company is an integrated brand owner, manufacturer, and distributor of non-alcoholic beverages in the United States, Mexico and Canada.

Dr Pepper Snapple’s Earnings

In mid-February, Dr Pepper Snapple released its earnings for the fourth quarter of 2012. The company missed its estimates and reported earnings of $170 million, or 81 cents per share, versus 77 cents per share last year; analysts were expecting earnings per share of 85 cents. Revenues were up 1.6% to $1.48 billion, but didn’t meet market estimates of $1.49 billion.

According to the company, volumes declined by 1% amid a drop in beverage concentrates. Volume for the Dr Pepper brand was down 1%, while Snapple grew by 1%.

Forecast for 2013

As raw material costs are expected to remain high in 2013, Dr Pepper Snapple Group Inc. (NYSE:DPS) expects a slightly lower income than analysts’ estimates. High packaging and ingredients’ costs would add cost of goods sold to around 2%. Most of this increase is linked to higher costs of apples, while the rest is associated with corn and paper board. For the full year, the company expects earnings of $3.04 to $3.12 per share and sales growth of 3%. Analysts had expected an income of $3.20 per share on revenues of $6.17 billion.

Valuation

Dr Pepper Snapple Group is trading at a forward P/E (1yr) of 12.92x and has a dividend yield of 3.50. It has a PEG of 2.36 and a growth rate of 6%. Incorporating its dividend yield in its PEG gives us a PEGY of 1.5. Using an industry forward P/E of 15.1x, I would value Dr Pepper Snapple. But, as Dr Pepper Snapple faces competition from giants such as The Coca-Cola Company (NYSE:KO) and PepsiCo, Inc. (NYSE:PEP), I would value it using a discount of 10%.

Using low estimates, Dr Pepper Snapple’s value comes out to be $43, showing that it’s trading at its fair value. Hence, it doesn’t have any upside potential at the moment.

Competitors

The beverage giant The Coca-Cola Company (NYSE:KO) is trading at a forward P/E (1yr) of 16.53x, showing that it’s a rather expensive buy in the beverage industry amid high expectations from investors. It has a dividend yield of 2.70% and a PEG of 1.97. A mean recommendation of 2.2 shows that it’s a far more attractive buy than Dr Pepper Snapple Group. Using earnings multiple, we value Coca Cola at $43, which shows an upside of almost 12%, making it a must-buy. You can have a further look at my detailed take on Coca Cola here.