Keurig Dr Pepper Inc. (NASDAQ:KDP)

The analysis of the quarterly financial ratios and periods reveals several important trends regarding operational efficiency and liquidity management.

Inventory Turnover

The inventory turnover ratio shows a declining trend over the analyzed periods, dropping from 7.09 in March 2020 to 5.04 by June 2022. This decline suggests a slower rate of inventory movement, indicating that the company is taking longer to sell its inventory stock, which may imply decreasing demand or overstocking issues.

Receivables Turnover

The receivables turnover ratio remains relatively stable, hovering around 10.5 to 11.3 throughout the periods. The slight decrease observed in the last recorded quarter (June 2022) to 10.01 indicates a minor slowdown in collecting receivables, which could affect cash inflows.

Payables Turnover

A consistent decline in payables turnover is evident, from 1.49 in March 2020 down to 1.26 in June 2022. This trend suggests the company is paying its suppliers more slowly over time, possibly to optimize cash flow or in response to extended supplier credit terms.

Average Inventory Processing Period

The average inventory processing period increased from 52 days in March 2020 to 72 days by June 2022, indicating the company is holding inventory longer before sale, reinforcing the observed decline in inventory turnover.

Average Receivable Collection Period

The receivable collection period remains fairly stable between 32 and 36 days, with a slight increase around the latest quarters, implying a generally consistent credit policy and collection efficiency with minor delays recently.

Operating Cycle

The operating cycle shows a gradual increase over time, from 86 days in March 2020 to 108 days by June 2022. This elongation reflects the combined effect of slower inventory turnover and marginally longer receivable collections.

Average Payables Payment Period

The average payables payment period lengthens from 245 days in March 2020 to 290 days in June 2022, demonstrating an extended duration in settling payables. This extension partially offsets the longer operating cycle, contributing positively to cash flow management.

Cash Conversion Cycle

The cash conversion cycle remains negative throughout the periods, ranging between -159 and -186 days for most quarters but slightly rising to -182 days by June 2022. The negative cash conversion cycle indicates the company benefits from supplier credit terms that exceed the time inventory and receivables are tied up, effectively using payables to finance operations. However, the slight upward movement in recent periods suggests this benefit is marginally decreasing.

Overall, the data indicate a trend toward longer inventory holding periods and slower inventory turnover, paired with stable receivables collection but slower payables payment. These trends collectively increase the operating cycle but maintain a negative cash conversion cycle, implying effective use of supplier financing. Monitoring inventory levels and turnover will be important to prevent potential liquidity constraints, while ongoing management of payables terms appears to support the company's working capital strategy.

Cost of Sales

The cost of sales demonstrated a general upward trend over the periods analyzed. Beginning at 1,161 million USD as of March 31, 2020, the cost increased steadily with some quarterly fluctuations, reaching 1,778 million USD by June 30, 2022. Notably, there was a significant rise in the last two recorded quarters, indicating growing expenses related to production or procurement.

Inventories

Inventory levels increased consistently throughout the periods. Starting at 682 million USD on March 31, 2020, inventories rose steadily to 1,239 million USD by June 30, 2022. Although there were minor decreases in a few quarters, the overall trend suggests increased stockholding, potentially as a response to rising demand or supply chain considerations.

Inventory Turnover Ratio

The inventory turnover ratio showed a downward trend across the timeline. Beginning at 7.09 in March 2020, it declined steadily to 5.04 by June 2022. This decline indicates that the company was turning over its inventory less frequently over time, which could suggest either slowing sales velocity relative to inventory or increasing inventory levels outpacing cost of sales growth.

Summary Insights

The simultaneous increase in both cost of sales and inventory suggests expanding business operations or inflationary effects. However, the decreasing inventory turnover ratio indicates that inventory management efficiency could be declining, potentially signaling a buildup of stock or slower sales progression relative to inventory held. These patterns highlight a need for attention to inventory control and sales alignment to maintain operational efficiency.

The financial data reveals several notable trends over the observed quarters. Net sales demonstrate a general upward trajectory with some fluctuations. After a growth phase from March 2020 through December 2020, reaching a peak of 3,121 million US dollars, a slight decline was noted in the first quarter of 2021. However, this was followed by a consistent increase through June 2022, culminating at 3,554 million US dollars, which signifies robust sales growth towards the end of the period.

Trade accounts receivable, net, shows a steady increase throughout the entire timeframe. Starting at 1,037 million US dollars in March 2020, it reached 1,326 million US dollars by June 2022. This upward trend aligns with the increasing sales volume and suggests an expansion in credit sales or a lengthening credit period.

The receivables turnover ratio fluctuates mildly but displays a slight downward trend toward the end of the period. Initially, the ratio rose from 10.83 to a peak of 11.33 between March 2020 and June 2021, indicating improved efficiency in collecting receivables. However, after this peak, the ratio decreases steadily to 10.01 by June 2022, implying a slower conversion of receivables into cash, which may warrant attention to receivables management practices.

Net Sales

Overall increasing trend with minor fluctuations, reaching a high of 3,554 million US dollars by June 2022.

Trade Accounts Receivable, Net

Consistent increase, suggesting higher credit sales or extended payment terms, rising from 1,037 to 1,326 million US dollars.

Receivables Turnover Ratio

Initial improvement followed by gradual decline, indicating a possible slowdown in receivables collection efficiency over time.

Cost of Sales

The cost of sales demonstrated an overall increasing trend from March 2020 through June 2022. Starting at 1,161 million US dollars in March 2020, this figure rose steadily with some minor fluctuations, reaching a peak of 1,778 million US dollars by June 2022. This reflects a significant growth in costs associated with producing goods or services over the analysis period, which may be indicative of higher sales volume, inflationary pressures, or changes in input prices.

Accounts Payable

Accounts payable consistently increased during the same timeframe, rising from 3,238 million US dollars in March 2020 to 4,950 million US dollars by June 2022. The steady upward movement suggests an expanding scale of operations or extended payment terms from suppliers. The continuous growth in payables aligns with the rise in cost of sales, indicating greater purchase activity or delayed cash outflows relating to supplier obligations.

Payables Turnover Ratio

The payables turnover ratio exhibited a gradual decline over the periods analyzed, dropping from 1.49 in March 2020 to 1.26 in June 2022. A lower turnover ratio typically indicates that the company is taking longer to pay its suppliers. This trend, coinciding with the growing accounts payable balance, implies a lengthening of payment cycles, which could be a result of strategic cash management practices or changing supplier credit terms.

The analysis of the quarterly financial data reveals several notable trends and patterns over the observed periods. Focusing on the key metrics of working capital, net sales, and working capital turnover provides insight into operational efficiency and financial management.

Working Capital

The working capital figures remain consistently negative throughout the periods analyzed, indicating that current liabilities exceed current assets. The negative working capital slightly fluctuates but shows a general trend of improvement, moving from -4,581 million USD at the beginning of 2020 to around -2,990 million USD by mid-2022. This gradual reduction in the magnitude of negative working capital suggests a progressive strengthening of short-term financial position, as liabilities may be reducing faster or assets increasing.

Net Sales

Net sales demonstrate a clear upward trajectory across the quarters. Beginning at 2,613 million USD in the first quarter of 2020, sales progressively rise to 3,554 million USD by the middle of 2022. This represents a robust increase over time, with occasional quarterly variations but a consistent positive trend overall. The growth in net sales indicates expanding market demand and/or effective sales strategies.

Working Capital Turnover

Working capital turnover ratios were not provided in the data and thus cannot be directly analyzed. However, given the negative working capital position throughout, traditional interpretations of turnover ratios might be challenging or less meaningful. A negative working capital scenario typically implies that the company is efficiently managing its working capital by utilizing supplier credit or operating with limited current capital.

In summary, the data depicts a company improving its working capital position while simultaneously increasing net sales significantly. The negative working capital, although improving, suggests reliance on short-term liabilities. The rising sales figures reflect favorable business performance. No explicit ratio calculations are available to measure the relative efficiency of working capital usage, but the trends suggest enhanced operational management over the analyzed time frame.

Inventory Turnover

The inventory turnover ratio demonstrates a declining trend over the observed periods. Starting at 7.09 in the first quarter of 2020, it gradually decreased to 5.04 by the second quarter of 2022. This decline indicates a slower rate of inventory movement through sales or usage, which could suggest less efficient inventory management or a buildup of inventory relative to sales volume.

Average Inventory Processing Period

The average inventory processing period, which reflects the number of days required to sell or process inventory, shows an increasing trend over the periods reviewed. Initially at 52 days in the first quarter of 2020, it increased to 72 days by the second quarter of 2022. This elongation in processing time correlates inversely with the declining inventory turnover ratio, indicating that inventory remains on hand longer before being sold or utilized.

Overall Inventory Insights

The opposing trends between inventory turnover and the average inventory processing period suggest that the company has experienced a slowdown in inventory movement. This could be due to factors such as changes in demand, supply chain disruptions, or inventory management strategies. The increased duration to process inventory may have implications on liquidity and working capital, requiring closer monitoring to optimize operational efficiency.

The analysis of the quarterly financial data reveals discernible trends in both receivables turnover and the average receivable collection period over the examined periods.

Receivables Turnover

The receivables turnover ratio initially shows a slight increase from 10.83 to 11.17 between the first and second quarters of 2020. Throughout 2020 and into the first half of 2021, this ratio maintains a relatively stable range, fluctuating narrowly between approximately 10.88 and 11.33. This stability suggests consistent efficiency in collecting receivables during this period. However, from the third quarter of 2021 onward, the ratio gradually declines, reaching 10.01 by mid-2022. This downward movement may indicate a reduction in collection efficiency or slower sales turnover relative to receivables.

Average Receivable Collection Period

The average receivable collection period complements the turnover ratio trends. Initially, the days sales outstanding oscillate modestly between 32 and 34 days from early 2020 through late 2021, indicating steady credit and collection terms. Starting from the first quarter of 2022, there is a slight upward trend increasing from 34 days to 36 days by mid-2022. This increment corresponds inversely with the declining receivables turnover, signifying that receivables are being collected over a longer timeframe in recent quarters.

Overall, the data show a period of relative stability in receivables management through 2020 and most of 2021 followed by a gradual softening in collection efficiency in early 2022. This could reflect changes in credit policies, customer payment behavior, or other operational factors impacting cash flow timing.

The quarterly financial data reveals notable trends in the company's working capital efficiency over the examined periods.

Average Inventory Processing Period

The average inventory processing period exhibits a general upward trend across the periods. Starting at 52 days in March 2020, it fluctuated moderately but increased to 72 days by June 2022. This increase indicates that inventory remains in stock for a longer duration before being processed or sold, suggesting potential challenges in inventory management or changes in product turnover rates over time.

Average Receivable Collection Period

The average receivable collection period remained relatively stable during the periods, with minor fluctuations mainly between 32 and 36 days. This stability suggests consistent efficiency in collecting receivables from customers, maintaining steady cash conversion related to accounts receivable.

Operating Cycle

The operating cycle, which combines the inventory processing and receivable collection periods, shows an upward movement over the quarters. Beginning at 86 days in March 2020, the operating cycle gradually lengthened to 108 days by June 2022. This increase reflects the elongation of the average duration from the acquisition of inventory to the receipt of cash from sales, primarily influenced by the growing inventory processing period.

In summary, the company's operating cycle and inventory processing period have experienced noticeable increases, while receivable collection remains stable. This pattern suggests that while the company maintains effective receivables management, there may be growing inefficiencies or strategic choices affecting inventory turnover rates and overall cash conversion timing.

The analysis of the quarterly payables turnover and average payables payment period reveals a clear trend over the examined periods.

Payables Turnover

The payables turnover ratio demonstrates a consistent decline from 1.49 in March 2020 to 1.26 by June 2022. This decrease suggests that the frequency with which the company pays off its suppliers has gradually slowed down over the analyzed timeframe.

Average Payables Payment Period

The average payables payment period has exhibited a corresponding increase, rising from 245 days in March 2020 to 290 days in June 2022. This indicates that the company has been taking progressively longer to settle its payables, reflecting a lengthening of the payment cycle.

The inverse relationship between payables turnover and average payment period is consistent with typical financial behavior, where a reduced turnover ratio aligns with an extended payment period. The gradual increase in the number of days to pay suppliers could be indicative of a strategic decision to optimize cash flow or manage working capital more effectively. However, the extended payment terms might also impact supplier relationships or credit terms in the long term.

Overall, the data points to a deliberate shift towards slower payment pacing, which may require monitoring to ensure it does not adversely affect operational dynamics or supplier partnerships.

The analysis of the quarterly financial data reveals several noteworthy trends pertaining to inventory, receivables, payables, and the overall cash conversion cycle.

Average Inventory Processing Period

The inventory processing period demonstrated an overall increasing trend throughout the observed timeframe. It started at 52 days in the first quarter of 2020 and gradually increased, peaking at 72 days in the second quarter of 2022. This indicates a lengthening of the time inventory remains in process or in stock before being sold or utilized. Some fluctuations are evident, such as a reduction from 65 days in the third quarter of 2021 to 57 days in the fourth quarter of 2021, followed by a steady rise again.

Average Receivable Collection Period

The receivable collection period showed relative stability, with values oscillating narrowly between 32 and 36 days. Starting at 34 days in the first quarter of 2020, this metric saw minor decreases and increases thereafter, ending slightly higher at 36 days in the second quarter of 2022. This suggests that the efficiency in collecting receivables remained consistent with only modest variability.

Average Payables Payment Period

The payables payment period exhibited a consistent upward trend, increasing steadily from 245 days in the first quarter of 2020 to 290 days in the second quarter of 2022. This reflects an extension in the time taken to pay suppliers and creditors, potentially indicating more favorable payment terms or a strategic delay in outflows.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the periods, starting at -159 days in early 2020 and fluctuating around this negative range before reaching -182 days by mid-2022. The negative values signify that payables turnover is longer than the sum of inventory and receivables periods combined, which can be beneficial for liquidity. However, the cycle displayed some volatility, with the deepest negative value of -186 days occurring in the last quarter of 2021, followed by a slight improvement, then a minor reversal by mid-2022.

Overall, the increasing inventory processing and payables payment periods coupled with relatively stable receivables collection period have contributed to maintaining a significantly negative cash conversion cycle. This indicates an extended period between cash outflows and inflows, potentially providing the company with enhanced short-term liquidity management. The lengthening inventory duration and payables period may reflect operational or strategic shifts affecting working capital components.