In the second Executive Decision segment of his "Mad Money" program Monday, Jim Cramer sat down with Bob Gamgort, chairman and CEO of Keurig Dr Pepper Inc. (KDP) , the beverage company with shares that are up 11.6% for the year to date and up more than 20% since the merger of Dr Pepper Snapple with Keurig Green Mountain a little over a year ago.
Gamgort said his company is the perfect mix of renovation and innovation, reviving old brands and creating new ones. He said Dr Pepper is growing thanks to new, limited-edition flavors, while Canada Dry ginger ale now commands 70% market share and is also growing thanks to new flavors and innovations.
As for the company's other namesake, Keurig, Gamgort said more than 28 million homes now have a Keurig brewer and that brand also keeps innovating with new products such as the forthcoming "Duo" brewers. Keurig is also working hard to reduce its environmental footprint with recyclable K-Cups that have already debuted in Canada.
When asked about other hot topics such as alcoholic beverages and tariffs, Gamgort said Keurig's distribution network is for non-alcoholic beverages, which is why it has partnered with Anheuser-Busch Inbev (BUD) . As for tariffs, Gamgort said in the short term the company estimates an impact of $10 million to $15 million, but that will be mitigated by 2020.
Let's look at the charts of KDP.
In this daily bar chart of KDP, below, we can see an uptrend from October to June, but prices are showing some weakness from the late June zenith. Prices broke the June support around $28 but have bounced back a little. The daily On-Balance-Volume (OBV) line has declined from late June to signal that sellers of KDP are now acting more aggressively than buyers. In the lower panel we can see equal peaks in May and June from the momentum indicator. When compared to the higher price highs in May and June this gives us a bearish divergence and may have foreshadowed the weakness in July.
In this Point and Figure chart of KDP, below, we can see the pattern of higher highs and higher lows. A price target of around $33 is projected. A decline to $27.26, however, will probably weaken this chart.
Bottom line strategy: The long side of KDP does not feel right to me, but the bears don't take control until we break the recent lows around $27.50 or so. I would anticipate a sideways trading range with a possible downward bias.