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Why Is PepsiCo (PEP) Down 3.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for PepsiCo (PEP - Free Report) . Shares have lost about 3.4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PepsiCo due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
PepsiCo reported robust first-quarter 2022 results, wherein revenues and earnings beat the Zacks Consensus Estimate. Both top and bottom lines improved year over year. The company continued to benefit from investments in brands, go-to-market systems, supply chains, manufacturing capacity and digital capabilities to build competitive advantages. It also gained from the resilience and strength in the global beverage and convenient food businesses.
PepsiCo’s first-quarter core EPS of $1.29 beat the Zacks Consensus Estimate of $1.24 and increased 6.6% year over year. In constant currency, core earnings were up 7% from the year-ago period, backed by mitigation of inflationary pressures through cost-management and revenue-management initiatives. The company’s reported EPS of $3.06 grew 148% year over year in the quarter.
Net revenues of $16,200 million improved 9.3% year over year and surpassed the Zacks Consensus Estimate of $15,622 million. Revenues benefited from volume growth and robust price/mix in the reported quarter. Unit volume improved 3% and 6% year over year for the convenient food and beverage businesses, respectively. Foreign currency impacted revenues by 1%.
On an organic basis, revenues grew 13.7% year over year, driven by broad-based growth across categories and geographies. Consolidated organic volume was up 3% and effective net pricing improved 10% in the first quarter. Pricing gains were driven by strong realized prices across all segments.
Revenues were aided by acceleration across both global beverage and convenient food businesses. On a year-over-year basis, organic revenues grew 13% for the beverage business and 14% for the convenient food business. Region-wise, organic revenues improved 13% for the North America business and 15% for the international business.
On a consolidated basis, the reported gross profit increased 7.6% year over year to $8,767 million. Core gross profit rose 9% year over year to $8,879 million. The reported gross margin contracted 90 basis points (bps), while the core gross margin expanded 5 bps.
The reported operating income of $5,267 million rose 127.8% year over year. Core operating income rose 6% year over year to $2,392 million and core constant-currency operating income fell 4%. The reported operating margin improved significantly to 32.5% from 15.6% in the year-ago quarter mainly due to the inclusion of gains from the Juice transaction. Meanwhile, the core operating margin declined 50 bps.
Segment Details
On a segmental basis, the company witnessed revenue growth across all segments. Revenues for the Europe segment remained flat with the last year on a reported basis. Organic revenues also ascended for all segments. Revenues, on a reported basis, improved 14% in FLNA, 11% in QFNA, 5.5% in PBNA, 19% in Latin America, 14% in AMESA and 8% in APAC. Organic revenues increased 14% for FLNA, 11% for QFNA, 13% for PBNA, 22% for Latin America, 11% for Europe, 18% for AMESA and 9% for APAC.
Operating profit (on a reported basis) increased 4.5% for FLNA, 6% for QFNA, 839% for PBNA, 48% for Latin America, 30% for AMESA and 3% for APAC. Yet, it declined 204% for Europe.
Financials
The company ended first-quarter 2022, with cash and cash equivalents of $6,561 million, long-term debt of $34,590 million, and shareholders’ equity (excluding non-controlling interest) of $18,202 million. Net cash used in operating activities was $174 million as of Mar 19, 2022, compared with $719 million as of Mar 20, 2021.
Outlook
Looking ahead, PepsiCo is optimistic about its strong position in growing the global categories, which is likely to help steer the ongoing challenging operating environment. It expects to benefit by delivering convenience, variety and value proposition to customers through its brands. However, the company anticipates higher input cost inflation for the balance of 2022. Given the strength and resilience of its businesses, PepsiCo expects organic revenue growth of 8% for 2022 compared with 6% growth mentioned earlier. The company expects core constant-currency earnings per share to increase 8% from a year ago.
Based on the above assumption, it now estimates core earnings per share of $6.63 for 2022, suggesting a 6% increase from $6.26 reported in 2021. It earlier anticipated core earnings per share of $6.67 for 2022, indicating a 6.5% increase. PEP expects currency headwinds to hurt revenues and core earnings per share by 2 percentage points in 2022, based on the current rates. The company continues to expect a core effective tax rate of 20%.
PepsiCo remains committed to rewarding shareholders through dividends and share buybacks. The company anticipates total cash returns to shareholders of $7.7 million, including $6.2 million of cash dividends and $1.5 billion of share repurchases.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, PepsiCo has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PepsiCo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is PepsiCo (PEP) Down 3.4% Since Last Earnings Report?
A month has gone by since the last earnings report for PepsiCo (PEP - Free Report) . Shares have lost about 3.4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PepsiCo due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
PepsiCo Tops Q1 Earnings & Revenue Estimates, Ups View
PepsiCo reported robust first-quarter 2022 results, wherein revenues and earnings beat the Zacks Consensus Estimate. Both top and bottom lines improved year over year. The company continued to benefit from investments in brands, go-to-market systems, supply chains, manufacturing capacity and digital capabilities to build competitive advantages. It also gained from the resilience and strength in the global beverage and convenient food businesses.
PepsiCo’s first-quarter core EPS of $1.29 beat the Zacks Consensus Estimate of $1.24 and increased 6.6% year over year. In constant currency, core earnings were up 7% from the year-ago period, backed by mitigation of inflationary pressures through cost-management and revenue-management initiatives. The company’s reported EPS of $3.06 grew 148% year over year in the quarter.
Net revenues of $16,200 million improved 9.3% year over year and surpassed the Zacks Consensus Estimate of $15,622 million. Revenues benefited from volume growth and robust price/mix in the reported quarter. Unit volume improved 3% and 6% year over year for the convenient food and beverage businesses, respectively. Foreign currency impacted revenues by 1%.
On an organic basis, revenues grew 13.7% year over year, driven by broad-based growth across categories and geographies. Consolidated organic volume was up 3% and effective net pricing improved 10% in the first quarter. Pricing gains were driven by strong realized prices across all segments.
Revenues were aided by acceleration across both global beverage and convenient food businesses. On a year-over-year basis, organic revenues grew 13% for the beverage business and 14% for the convenient food business. Region-wise, organic revenues improved 13% for the North America business and 15% for the international business.
On a consolidated basis, the reported gross profit increased 7.6% year over year to $8,767 million. Core gross profit rose 9% year over year to $8,879 million. The reported gross margin contracted 90 basis points (bps), while the core gross margin expanded 5 bps.
The reported operating income of $5,267 million rose 127.8% year over year. Core operating income rose 6% year over year to $2,392 million and core constant-currency operating income fell 4%. The reported operating margin improved significantly to 32.5% from 15.6% in the year-ago quarter mainly due to the inclusion of gains from the Juice transaction. Meanwhile, the core operating margin declined 50 bps.
Segment Details
On a segmental basis, the company witnessed revenue growth across all segments. Revenues for the Europe segment remained flat with the last year on a reported basis. Organic revenues also ascended for all segments. Revenues, on a reported basis, improved 14% in FLNA, 11% in QFNA, 5.5% in PBNA, 19% in Latin America, 14% in AMESA and 8% in APAC. Organic revenues increased 14% for FLNA, 11% for QFNA, 13% for PBNA, 22% for Latin America, 11% for Europe, 18% for AMESA and 9% for APAC.
Operating profit (on a reported basis) increased 4.5% for FLNA, 6% for QFNA, 839% for PBNA, 48% for Latin America, 30% for AMESA and 3% for APAC. Yet, it declined 204% for Europe.
Financials
The company ended first-quarter 2022, with cash and cash equivalents of $6,561 million, long-term debt of $34,590 million, and shareholders’ equity (excluding non-controlling interest) of $18,202 million. Net cash used in operating activities was $174 million as of Mar 19, 2022, compared with $719 million as of Mar 20, 2021.
Outlook
Looking ahead, PepsiCo is optimistic about its strong position in growing the global categories, which is likely to help steer the ongoing challenging operating environment. It expects to benefit by delivering convenience, variety and value proposition to customers through its brands. However, the company anticipates higher input cost inflation for the balance of 2022. Given the strength and resilience of its businesses, PepsiCo expects organic revenue growth of 8% for 2022 compared with 6% growth mentioned earlier. The company expects core constant-currency earnings per share to increase 8% from a year ago.
Based on the above assumption, it now estimates core earnings per share of $6.63 for 2022, suggesting a 6% increase from $6.26 reported in 2021. It earlier anticipated core earnings per share of $6.67 for 2022, indicating a 6.5% increase. PEP expects currency headwinds to hurt revenues and core earnings per share by 2 percentage points in 2022, based on the current rates. The company continues to expect a core effective tax rate of 20%.
PepsiCo remains committed to rewarding shareholders through dividends and share buybacks. The company anticipates total cash returns to shareholders of $7.7 million, including $6.2 million of cash dividends and $1.5 billion of share repurchases.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, PepsiCo has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PepsiCo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.