PepsiCo (PEP) Beats on Earnings, Raises Guidance

Shares of PepsiCo Inc. (PEP) were trading up +3.27 or +3.05 percent to $110.65 per share in Thursday’s premarket after the company announced better than expected third quarter earnings early this morning. PepsiCo stock closed at $107.38, down -0.11 or -0.10 percent in Wednesday’s regular trading session.

Stock Analysis

Purchase, New York based PepsiCo Inc. was originally founded as the Pepsi-Cola company in 1898.
The company then merged with Frito-Lay, Inc. in 1965 to become PepsiCo Inc. Since then the company has acquired a number of other food and beverage brands with its acquisition of Tropicana in 1998 and Quaker Oats in 2001. The multinational enterprise is one of the world’s largest companies of its type with operations in North and South America, Europe, Asia, the Middle East and Africa and employs more than 274,000 people globally.

After excluding stock option expenses, PepsiCo reported better than expected core earnings for its third quarter of $1.40 per share versus the market’s $1.32 per share consensus.
PepsiCo (PEP) Beats on Earnings, Raises Guidance
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Core constant currency EPS growth was at 7 percent for the quarter and year to date. Revenue was $16.03 billion, which also bested the $15.89 billion consensus. This represents a revenue increase of 4.2 percent that was a considerable improvement over last quarter’s 3.3 percent rise.

Based on this solid performance, the company’s leadership boosted its core guidance for 2016’s earnings per share to $4.78 from its previous suggested EPS result of $4.71.  This is the fourth straight quarter that PepsiCo has reported a favorable earnings surprise. In addition, the company says it anticipates roughly $3 billion in capital expenditures.

PepsiCo Chairman and Chief Executive Officer, Indra Nooyi noted in the company’s press release that, “We are pleased with our results for the third quarter and year to date.  We  are  executing  our strategy  well  and  managing  what  is  in  our  control.    Our product portfolio, geographic mix and capability centers are enabling us to deliver balanced revenue and productivity”, and that, “Based  on  our  year-to-date  performance  and  our  outlook  for  the  fourth quarter, we are raising our full-year core constant currency EPS growth objective.”

Core gross margins continued expanding in the third quarter, rising 50 basis points, while core operating margin increased by 30 basis points, largely on the back of improvements in productivity and a reduction in the cost of raw materials. In addition, the company’s core tax rate declined to 23.3 percent for the third quarter, down from the 24.6 percent reported for the same quarter last year.

PepsiCo’s stock reacted favorably to its third quarter earnings report in this morning’s premarket by rising $3.27 or 3.05 percent in early trading to $110.65. The company remains a solid bet in the food and beverage sector as the stock again approaches its yearly high of 110.94.

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Published on Sep 29, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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