North American beverage firm Dr. Pepper Snapple (NYSE:DPS) closed out 2010 with modest sales growth and solid profit growth for the full-year period. It expects another strong year of earnings improvements for the coming year, but beyond that, it's difficult to see where shareholder growth is going to stem from.

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Fourth Quarter Recap
Net sales increased 4.1% to $1.4 billion. Sales of beverage concentrate of its carbonated soft drinks in the U.S. and Canada grew 14.3% to account for nearly 23% of total sales. Dr. Pepper boasts it is the market leader in the U.S. with a more than 40% market share. Packaged beverage sales of non-carbonated drinks including Snapple and Hawaiian Punch rose 1.1% and accounted for the highest percentage of total sales at nearly 71%. Sales in this segment are also made in the U.S. and Canada where Dr. Pepper competes with the likes of Cott Corp (NYSE:COT) and REEDS (Nasdaq:REED). Latin American beverage sales, most of which stem from Mexico, made up the rest and grew 5.4%.

Segment operating profit grew 3% as only the concentrate business was able to boost profitability during the quarter. Total company operating income improved nearly 7% to $268 million. An accounting loss from paying down debt sent net income down 1.8% to $112 million, or 49 cents per diluted share. This came in ahead of analyst projections.

Annual Review
Full-year sales grew a modest 1.8% to $5.6 billion as packaged beverage was the only unit to post positive growth. The beverage concentrate unit increased profits to offset declines at the other two units as segment operating profits increased less than 1%. Total operating income fell 5.5% to $1 billion while reported net income fell 4.9% to $528 million, or $2.17 per diluted share. Stripping out one-time items, management estimated the bottom line grew 22% to $2.40 per diluted share.

Dr. Pepper also inked two longstanding licensing agreements with archrivals PepsiCo (NYSE:PEP) and Coca-Cola (NYSE:KO) as both acquired their North American bottlers. The agreements resulted in payments to Dr. Pepper totaling $1.6 billion and allowed it to pay down debt and repurchase shares.

Outlook
For the coming year, management expects sales growth between three and five percent and earnings in a range of $2.70 and $2.78 per diluted share. This would represent year-over-year growth of between 12.5% and 15.8% from operating earnings for 2010.

Bottom Line
Dr. Pepper Snapple has done a fantastic job at improving efficiencies and cash flows since being spun out from Cadbury Schweppes in 2008. But sales growth remains weak and will likely remain challenging given the firm operates primarily in mature markets in North America. The forward P/E is very reasonable at less than 13 and dividend yield is appealing at 2.9%, but it's difficult to see annual double-digit total returns for shareholders over the long term. (For more, check out Parched For Profits? Try Beverage Stocks.)

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