With a wide selection of companies on board to report quarterly results this week, earnings season is officially beginning to rev up. During 2022 Q1, many companies, if not all, had their results negatively impacted by supply chain issues caused by the war in Ukraine and skyrocketing costs.

There were few places where investors could park their cash safely, and double-digit valuation slashes were widespread following the quarterly results from many companies.

Nonetheless, the initial results we receive this week will be absolutely crucial, as they will give us a better idea of how companies have continued to battle rising costs and give us a deeper view of consumer sentiment.

One company slated to release quarterly results before the market opens tomorrow is the widely popular and recognized PepsiCo (PEP Quick QuotePEP - Free Report) . PepsiCo is an American multinational beverage, food, and snack corporation headquartered in New York.

PEP is currently a Zacks Rank #4 (Sell) with an overall VGM Score of a D. PEP resides in the Zacks Beverages - Soft Drinks Industry, which currently ranks in the bottom 27% of all Zacks Industries.

Let’s look at how the company shapes up heading into tomorrow morning.

Share Performance & Valuation

Year-to-date, PepsiCo shares have weathered a brutal storm quite nicely, declining just 0.3% in value and easily outperforming the S&P 500.

Image Source: Zacks Investment Research

In fact, PEP shares have been notably strong over the last year, increasing by a double-digit 17% in value and easily outpacing the S&P 500 in this timeframe as well.

Image Source: Zacks Investment Research

The company sports a forward earnings multiple on the high side of things at 25.9X, well above its five-year median of 23.8X. In addition, shares trade at an 8% premium relative to its Zacks Industry.

PEP has a Value Style Score of a C.

Image Source: Zacks Investment Research

Quarterly Performance

PepsiCo has consistently reported strong bottom and top-line results, exceeding EPS estimates in nine of its last ten quarters. Additionally, the company has beaten top-line estimates in 15 consecutive quarters dating back to 2018.

Image Source: Zacks Investment Research

In its latest report, PEP exceeded the Zacks Consensus EPS Estimate by a respectable 4% and reported quarterly EPS of $1.29. Shares have generally reacted well to EPS beats; shares have moved upwards seven times over its last ten EPS beats.  

However, shares moved downwards following the company’s quarterly report in 2021 Q4 whenever PEP reported EPS in line with expectations. Overall, an EPS beat alludes to share appreciation.

Growth Estimates

For the quarter to be reported tomorrow morning, the Zacks Consensus EPS Estimate resides at $1.72, registering zero change in the bottom-line from the year-ago quarter. Additionally, over the last 60 days, the Consensus Estimate Trend has remained unchanged.

Quarterly revenue is forecasted to come in at $19.8 billion, penciling in a modest 3% uptick in quarterly revenue from the year-ago quarter. Heading into the report, PEP sports an Earnings ESP Score of 1.06%.

Bottom Line

Inflationary pressures and impacted supply chains are expected to weigh heavily on margins across the industry. Although shares have held up relatively well year-to-date, PEP’s Zacks Rank #4 (Sell) gives a heightened level of concern heading into the quarterly report.

Valuation levels also appear a bit elevated, with PEP shares trading noticeably above their five-year median average forward P/E ratio. For these reasons, I believe it’s beneficial for investors to stay on the sidelines.