Photo Credit: Mike Mozart

PepsiCo, Inc. (PEP) Consumer Staples - Beverages | Reports July 7, Before Market Opens

Key Takeaways:

• The Estimize consensus is looking for earnings per share of $1.31 on $15.45 billion in revenue, 3 cents higher than Wall Street on the bottom line and $40 on the 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 second quarter earnings tomorrow, before the market opens. With a better than expected Q1, Pepsi has topped earnings 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 12% over the past 12 months.

The Estimize consensus is looking for earnings per share of $1.31 on $15.45 billion in revenue, 3 cents higher than Wall Street on the bottom line and $40 on the top. At the current estimates, this represents a decline in both earnings and sales compared to a year earlier. Shareholders have still reacted positively to earnings regardless of weak year-over-year comparisons. Through earnings and 30 days following a report, Pepsi stock has typically increased 1%.

After a weak Q4 Pepsi rebounded with better than expected Q1 earnings. The quarter featured a 3.5 increase in organic revenue driven by effective marketing initiatives, new product launches and its focus on greater efficiency. The company’s snack sector has been its highest growth area with Frito-Lay manning the helm. On the beverage side, the business has seen a nice boost from productivity gains and lower raw material costs. However, continued currency headwinds and changing consumer preferences have taken its toll on global performance. Soda consumption in the U.S. has reached all time lows which hasn’t done Pepsi and larger rival Coca-Cola any favors.

Overall the Consumer Soft Drinks (CSD) sector has seen volume and revenue decline in 11 consecutive quarters. Persisting global volatility and currency headwinds should continue to pressure Pepsi’s soft drink sales. It will be important to watch whether Pepsi guides for lower sales and earnings for the remainder of the year following Brexit uncertainty. The company is already expecting its Venezuelan division to have a 2% negative impact on earnings this year. Pepsi has done a good job to withstand macroeconomic risk but its look as if it will be catching up to them in the near future.