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PepsiCo (PEP) Q1 Earnings: Will it Pull Off a Surprise?
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Food/beverage giant PepsiCo, Inc. (PEP - Free Report) is set to report first-quarter 2017 results on Apr 26, before the market opens.
Last quarter, this major global food and beverage company posted a positive earnings surprise of 3.45% Moreover, the company surpassed estimates in all of the trailing four quarters, resulting in an average positive earnings surprise of 6.22%.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that PepsiCo is likely to beat earnings estimates because it has the perfect combination of two key ingredients.
Zacks ESP: PepsiCo’s Earnings ESP is +1.10% as the Most Accurate estimate is pegged at 92 cents while the Zacks Consensus Estimate is at 91 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: PepsiCo currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is witnessing a negative estimate revision.
The combination of PepsiCo’s Zacks Rank #3 and +1.10% ESP makes us reasonably confident of an earnings beat.
Factors at Play
Currency headwinds and persistent sluggish carbonated soft drinks ("CSD") volumes are pressing concerns for this beverage giant as well as for other nonalcoholic beverage companies like The Coca-Cola Company (KO - Free Report) and Dr Pepper Snapple Group, Inc. . Health-conscious consumers are shifting from soda beverages to still or noncarbonated beverages. PepsiCo’s total revenue declined 0.4% in 2016.
To counter the slowing CSD trend, PepsiCo is banking on innovations focusing on healthier snack food options and seeking growth in the still or noncarbonated beverages category. For that, PepsiCo introduced new recipes for Mirinda and 7UP with 30% less sugar. The company launched its J7 apple juice in Russia. Within its snack food category, it came up with Quaker Breakfast Flats.
The company is also making strategic acquisitions to grow its noncarbonated beverage portfolio. In Nov 2016, the company signed a deal to acquire KeVita, a North American maker of fermented probiotic and kombucha beverages.
Notwithstanding the above-mentioned concerns, the company beat expectation in all of the four quarters of 2016. PepsiCo’s fourth-quarter revenue grew 5% after eight consecutive quarters of decline. Even its adjusted EPS (earnings per share) grew 7.2%, 2.3%, 3.7% and 13.2% in the first, second, third and fourth quarter, respectively, on margin expansion. Its core operating margins rose 80 basis points in 2016 on effective revenue management strategies and productivity gains. We expect this trend to show in the to-be-reported quarter as well.
However, as highlighted during the fourth-quarter earnings call, PepsiCo’s first quarter organic sales at its Asia-Middle East-North Africa (or AMENA) division is expected to drop due to higher volatility in the region and the timing of Chinese New Year. PepsiCo also anticipates holiday calendar shifts to modestly impact its revenue in North America in the to-be-reported quarter.
For the first quarter, the Zacks Consensus Estimate for earnings stands at 91 cents, reflecting a 1.8% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $11.95 billion, implying a 0.8% growth.
Here are some other companies in the broader Consumer Staples sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Dr Pepper Snapple Group, Inc. has an Earnings ESP of +1.04% and a Zacks Rank #3. The company is slated to report quarterly results on Apr 26.
Newell Brands Inc. (NWL - Free Report) has an Earnings ESP of +6.90% and a Zacks Rank #3. The company is scheduled to report its quarterly numbers on May 8.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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PepsiCo (PEP) Q1 Earnings: Will it Pull Off a Surprise?
Food/beverage giant PepsiCo, Inc. (PEP - Free Report) is set to report first-quarter 2017 results on Apr 26, before the market opens.
Last quarter, this major global food and beverage company posted a positive earnings surprise of 3.45% Moreover, the company surpassed estimates in all of the trailing four quarters, resulting in an average positive earnings surprise of 6.22%.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that PepsiCo is likely to beat earnings estimates because it has the perfect combination of two key ingredients.
Zacks ESP: PepsiCo’s Earnings ESP is +1.10% as the Most Accurate estimate is pegged at 92 cents while the Zacks Consensus Estimate is at 91 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: PepsiCo currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is witnessing a negative estimate revision.
The combination of PepsiCo’s Zacks Rank #3 and +1.10% ESP makes us reasonably confident of an earnings beat.
Factors at Play
Currency headwinds and persistent sluggish carbonated soft drinks ("CSD") volumes are pressing concerns for this beverage giant as well as for other nonalcoholic beverage companies like The Coca-Cola Company (KO - Free Report) and Dr Pepper Snapple Group, Inc. . Health-conscious consumers are shifting from soda beverages to still or noncarbonated beverages. PepsiCo’s total revenue declined 0.4% in 2016.
To counter the slowing CSD trend, PepsiCo is banking on innovations focusing on healthier snack food options and seeking growth in the still or noncarbonated beverages category. For that, PepsiCo introduced new recipes for Mirinda and 7UP with 30% less sugar. The company launched its J7 apple juice in Russia. Within its snack food category, it came up with Quaker Breakfast Flats.
The company is also making strategic acquisitions to grow its noncarbonated beverage portfolio. In Nov 2016, the company signed a deal to acquire KeVita, a North American maker of fermented probiotic and kombucha beverages.
Notwithstanding the above-mentioned concerns, the company beat expectation in all of the four quarters of 2016. PepsiCo’s fourth-quarter revenue grew 5% after eight consecutive quarters of decline. Even its adjusted EPS (earnings per share) grew 7.2%, 2.3%, 3.7% and 13.2% in the first, second, third and fourth quarter, respectively, on margin expansion. Its core operating margins rose 80 basis points in 2016 on effective revenue management strategies and productivity gains. We expect this trend to show in the to-be-reported quarter as well.
However, as highlighted during the fourth-quarter earnings call, PepsiCo’s first quarter organic sales at its Asia-Middle East-North Africa (or AMENA) division is expected to drop due to higher volatility in the region and the timing of Chinese New Year. PepsiCo also anticipates holiday calendar shifts to modestly impact its revenue in North America in the to-be-reported quarter.
For the first quarter, the Zacks Consensus Estimate for earnings stands at 91 cents, reflecting a 1.8% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $11.95 billion, implying a 0.8% growth.
Pepsico, Inc. Price and EPS Surprise
Pepsico, Inc. Price and EPS Surprise | Pepsico, Inc. Quote
Other Stocks to Consider
Here are some other companies in the broader Consumer Staples sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Dr Pepper Snapple Group, Inc. has an Earnings ESP of +1.04% and a Zacks Rank #3. The company is slated to report quarterly results on Apr 26.
Coty Inc. (COTY - Free Report) , expected to report its quarterly numbers on May 2, has an Earnings ESP of +25.0% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Newell Brands Inc. (NWL - Free Report) has an Earnings ESP of +6.90% and a Zacks Rank #3. The company is scheduled to report its quarterly numbers on May 8.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>