Is Pepsi Hitting its Stride or About to Fizzle Out?

Photo Credit: Mike Mozart

PepsiCo, Inc. (PEP) Consumer Staples - Beverages | Reports April 18, Before Market Opens

Key Takeaways:

• The Estimize community is calling for EPS of $0.83 and revenue expectations of $11.89 billion, 2% higher than Wall Street on the bottom line and $15 million greater on top
• The soda industry has been under pressure lately, as health conscious consumers opt for alternative beverages that do not include sugar or artificial sweeteners
• Non Carbonated beverages and salty snacks are Pepsi’s two biggest growth markets, expected to carry the company’s future growth
• What are you expecting for PEP? Get your estimate in here!

Snack and beverage manufacturer, PepsiCo, is prepared to report first quarter earnings Monday, before the market opens. Despite a weak fourth quarter, Pepsi has had a spectacular run, topping expectations in 7 of the last 8 quarters. Early indications suggests Pepsi should continue to see strong organic growth driven by improved manufacturing efficiencies, new cost cutting controls, and innovative product offerings. The stock has tracked this positive momentum and is now up 8.65% on the past 12 months.

This quarter the Estimize community is calling for EPS of $0.83 and revenue expectations of $11.89 billion, 2% higher than Wall Street on the bottom line and $15 million greater on top. Compared to the same period last year, this predicts relatively flat growth on both earnings and sales. Fortunately, PepsiCo perineally beats expectations, trumping the Estimize consensus in 94% of recorded quarters.

The soda industry has been under pressure lately, as health conscious consumers opt for alternative beverages that do not include sugar or artificial sweeteners. Pepsi’s carbonated soft drinks category has been one of its slowest growing divisions in advanced countries and has only recently begun to gain traction in emerging markets. As a result Pepsi has leaned on its non carbonated beverages and snack brands to stimulate growth in key markets. Pepsi is currently responsible for successful brands such as Gatorade, Tropicana and Frito-Lay. Its Frito-Lay division alone propels Pepsi to an industry lead in the salty snack market. The company expects pricing and volume gains in this sector to carry the majority of the company’s future growth.

On the downside, Pepsi still faces challenges selling its core CSD (carbonated soft drinks) products while also competing with established leader Coca-Cola. Coca-Cola is the clear number one brand in carbonated beverage domestically and worldwide. Moreover, currency fluctuations and volatile commodity prices remains a near term headwind for the beverage company.