Pepsi Beats Q4 Estimates, Issues Mixed FY 2020 View

Pepsi Beats Q4 Estimates, Issues Mixed FY 2020 View
February 14, 2020


PepsiCo Inc. (PEP: Nasdaq) reported fiscal 2019 fourth-quarter profits that decreased from last year when the company received considerable tax benefits. Nevertheless, revenue and core earnings surpassed analysts’ estimates. The company also issued weaker-than-analysts’ forecasts for 2020. Following the quarterly earnings report, the stock closed almost flat at $146.47.

The Harrison, New York-based company, reported fourth-quarter revenue of $20.64 billion, an increase of 5.7% from $19.52 billion in the similar period last year. Analysts anticipated the company to post revenues of $20.27 billion for the quarter. The company posted organic revenue growth of 4.3%.

For the quarter ended December 31st, 2019, the brand owner of Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana posted a net income of $1.77 billion, or $1.26 per share, sharply down from $6.85 billion or $4.83 a share in the comparable quarter last year. In 4Q 2018, the company received $4.39 billion as tax benefits.

Core earnings for 4Q 2019 were $2.04 billion, or $1.45 per share, compared with $2.12 billion, or $1.49 a share, last year. Analysts surveyed by Thomson Reuters anticipated the company to post earnings of $1.44 per share for 4Q 2019.

Commenting on the results, CEO Ramon Laguarta said: “We are pleased with our performance for 2019 as we met or exceeded each of the financial goals we outlined at the beginning of the year.”

North American beverage division of Pepsi and Frito-Lay both recorded organic sales growth of 3%. While Frito-Lay’s volumes grew 2% in 4Q 2019, organic sales for Quaker Foods North America remained unchanged from last year. Quaker Foods division includes Aunt Jemima syrup and Life cereal.

Organic sales increased 6% y-o-y in Europe and Latin America. In Africa, the Middle East, and South Asia, organic sales grew 8%. Likewise, Asia Pacific, New Zealand, Australia, and China posted organic sales growth of 9% in the quarter.

CFO Hugh Johnston revealed that the company had shut down all of its production facilities in China “for a short period of time,” and all excepting one has been reopened. China accounts for 2% of Pepsi’s business.

To increase organic sales, Pepsi continues to spend on advertising and marketing, providing a boost to popular brands such as Bubly and Gatorade. Pepsi generated $2 billion via e-commerce business in 2019.

For fiscal 2020, PepsiCo anticipates recording 4% organic revenue growth and 7% core constant currency earnings per share growth. Furthermore, the food and beverage company forecasts FY 2020 annual core earnings of $5.88 per share, an increase of 6% from FY 2019 core earnings of $5.53 per share. The Street analysts anticipate yearly earnings of $5.95 per share.

The company also announced an annual dividend of $4.09 per share, reflecting a 7% increase from $3.82 per share paid last year. The dividend will be paid in June 2020.

The Q4 earnings beat and weak FY 2020 outlook are expected to keep the stock range-bound in the short-term.

The historical price chart indicates that the stock is trading above its 50-day moving average. Additionally, the Chaikin Money Flow indicator is in the positive region. Therefore, the stock is anticipated to remain bullish in the short-term.

pep - technical analysis - 14th Feb 2020

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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