Why Pepsi Earnings Don’t Have That Pop

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When PepsiCo Inc. (NYSE: PEP) released its fourth-quarter financial results before the markets opened on Wednesday, the beverage giant posted $1.20 in earnings per share (EPS) on $19.5 million in revenue. Consensus estimates from Thomson Reuters had called for $1.16 in EPS and revenue of $19.51 billion. The same period of last year reportedly had EPS of $1.06 and $18.59 billion in revenue.

During the quarter, net revenue increased 5%, while foreign exchange translation had a two percentage point unfavorable impact on reported net revenue.

Frito-Lay North America was positively affected by productivity gains and lower raw material costs, partially offset by operating cost inflation. Overall revenue was up 5% year over year.

Quaker Foods North America also was affected positively by a prior year impairment charge related to its dairy joint venture and ceasing its operations (nine percentage points), as well as lower raw material costs and productivity gains. Revenues were only up 1% from last year’s fourth quarter.

North America Beverages saw productivity gains and lower raw material costs, partially offset by operating cost inflation, with revenues rising 3%.

On the books, PepsiCo cash, cash equivalents and short-term investments totaled $16.13 billion at the end of the quarter, up from $12.01 billion in the same period of last year.

Indra Nooyi, board chair and chief executive of PepsiCo, commented:

We concluded 2016 with another strong quarter of operating performance, capping off a successful year. We met or exceeded every financial goal we set for 2016, while delivering a good balance between revenue performance and productivity. Looking ahead to 2017, we expect solid financial performance despite anticipated continued macroeconomic challenges. Further, reflecting our commitment to providing attractive cash returns to shareholders, we are increasing our dividend per share for the 45th consecutive year, beginning with our June 2017 payment.

Shares of Pepsi traded down 1.1% early Wednesday to $105.73. The consensus analyst price target is $115.03, and the 52-week trading range is $97.54 to $110.94.

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