JDE Peet's Buybacks and Coffee Surge: A Compelling Value Play

Amid a global coffee commodity boom and rising input costs, JDE Peet's (JDEP) is demonstrating remarkable discipline in capital allocation. The company's EUR 250 million share buyback program, now 27% complete with EUR 68.1 million deployed by late May 2025, underscores its confidence in long-term value. Pair this with a recent share price surge to EUR 22.94 and a strategic cost-pass-through mechanism, and investors are presented with a rare opportunity to buy a resilient consumer staple at a discount.

The Buyback Progress: A Signal of Strength

By May 26, 2025, JDE Peet's had repurchased 3.65 million shares at an average price of EUR 22.94, totaling EUR 68.1 million. This execution pace—over a quarter of the annual target in just three months—reflects management's conviction that shares are undervalued. The buyback program, part of a EUR 1 billion multi-year initiative, is funded by robust free cash flow (EUR 1.04 billion in 2024) and designed to boost earnings per share (EPS) by reducing dilution. With shares repurchased at prices below their intrinsic value, investors gain a leveraged position in a business with pricing power.

Why Capital Allocation Matters Now

JDE Peet's prioritizes returns to shareholders over expansion, a prudent move given its mature market position and stable cash flows. The buyback's primary goal is capital reduction—not speculation—ensuring that every euro spent strengthens shareholder equity. This contrasts sharply with peers diverting capital to risky ventures. Meanwhile, the company's disciplined approach to debt (net leverage at 2.5x EBITDA) leaves ample room for further buybacks or acquisitions.

Undervaluation: A Numbers Game

At EUR 22.94 per share, JDEP trades at 14.5x forward EPS, below its five-year average of 16.2x. The stock's price-to-free-cash-flow ratio of 11.8x is also compelling, especially as the buyback reduces shares outstanding and amplifies cash flow per share. For context, competitors like Nestlé trade at 18x forward EPS, suggesting JDEP is undervalued relative to its scale and brand strength.

The Coffee Price Surge: A Tailwind, Not a Threat

Green coffee prices rose 28% year-to-date as of May 2025, driven by supply chain disruptions and climate impacts. While this pressures margins in the short term, JDE Peet's has proven its ability to pass costs to consumers. The company's 2024 pricing strategy—adjusting retail prices by 5–7%—protected margins, and this discipline is expected to continue. Over time, higher coffee prices will solidify JDEP's pricing power, boosting long-term profitability.

Risks and Mitigants

• Commodity Volatility: Rising coffee prices could strain short-term margins, but JDE's hedging programs and pricing flexibility offset this.
• Buyback Pace: If share prices climb further, the EUR 250 million allocation may reduce the program's impact. However, this would reflect rising intrinsic value, not a misstep.

Conclusion: Act Now Before the Gap Closes

JDE Peet's combines a fortress balance sheet, shareholder-friendly capital allocation, and a tailwind from coffee's structural price increases. With shares trading below fair value and the buyback accelerating, this is a rare moment to invest in a defensive consumer staple. Investors should act swiftly: as the buyback reduces shares and pricing power solidifies, JDEP's valuation gap will narrow—not widen.

The call to action is clear: buy JDEP before the market catches up.