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PepsiCo (PEP) Surpasses Earnings & Revenue Estimates in Q4
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PepsiCo, Inc. (PEP - Free Report) had a strong finish to 2020, with fourth-quarter 2020 earnings and sales surpassing estimates and improving year over year. Despite continued challenges related to the coronavirus pandemic, the company’s robust fourth-quarter performance was backed by resilience and strength in its global snacks and foods business as well as accelerated growth in the beverage category.
PepsiCo also gained from its strong portfolio of brands, a responsive supply chain and flexible go-to-market systems, which helped maintain continued supplies amid the coronavirus pandemic.
Shares of this Zacks Rank #3 (Hold) company have declined 4.3% in the past three months compared with the industry’s 0.5% fall.
Quarter in Detail
PepsiCo’s fourth-quarter core earnings per share (EPS) of $1.47 beat the Zacks Consensus Estimate of $1.45 and increased 1.4% year over year. In constant currency, core earnings were up 3% from the year-ago period. The company’s reported EPS of $ 1.33 improved 5% year over year.
Net revenues of $22,455 million improved 8.8% year over year and also surpassed the Zacks Consensus Estimate of $21,996.3 million. On an organic basis, revenues grew 5.7% year over year. Foreign currency impacted revenues and earnings by 2% each in the fourth quarter. Revenues benefited from the continued momentum in the snacking category as well as gains in the beverage business.
Revenues also reflected gains from strong volume growth and robust pricing in the quarter. Total volume increased 3% in the reported quarter. Notably, organic volume improved 3% for the snacks/food business and 5% for the beverage business. Moreover, net pricing was up 3% in the fourth quarter, driven by pricing gains across almost all segments, except for Europe.
On a consolidated basis, reported gross margin contracted 115 basis points (bps), while core gross margin declined 113 bps. Reported operating margin declined 49 bps, while core operating margin was down 55 bps.
Segment Details
On a segmental basis, the company witnessed revenue growth across all segments, except for Latin America. Meanwhile, organic revenues also ascended for all segments.
Reported revenues improved 4% in Europe, 6% in FLNA, 8% in QFNA, 9% in PBNA, 53% in AMESA and 34% in APAC segments, whereas the metric declined 5% in Latin America. Organic revenues increased 8% each at Europe and QFNA segments, while the same was up 5% each for FLNA, AMESA and APAC segments. Further, organic revenues were up 5.5% for PBNA and 4.5% for Latin America.
Operating profit (on a reported basis) grew 2% for FLNA, 23% for QFNA, 24% for APAC and 2% for Europe. However, it declined 10% for Latin America, 11% each for AMESA and PBNA segments.
Financials
The company ended 2020 with cash and cash equivalents of $8,185 million, long-term debt of $40,370 million, and shareholders’ equity (excluding non-controlling interest) of $13,454 million.
Net cash provided by operating activities was $10,613 million as of Dec 26, 2020, compared with $9,649 million as of Dec 28, 2019.
Additionally, the company raised its annualized dividend by 5% to $4.30 per share from the prior dividend rate of $4.09 per share. The hiked dividend will come into force and is expected to be paid out in June 2021.
Outlook
Based on the 2020 performance and evolving business conditions, the company provided guidance for 2021. It expects organic revenue growth in mid-single digits, with core constant currency EPS growth in high-single digits.
It expects core effective tax rate of 21%. Additionally, the company expects currency tailwinds to aid its revenues and core EPS by 1 percentage point in 2021, based on the current rates.
Further, it remains committed to rewarding its shareholders through dividends and share buybacks. It anticipates total cash returns to shareholders of $5.9 million, including $5.8 million of cash dividends and $100 million of share repurchases. The company recently completed its share-repurchase authorization and expects no more share repurchases through the rest of 2021.
Coca Cola Femsa S.A.B. de C.V. (KOF - Free Report) has an expected long-term earnings growth rate of 9.6%. It presently carries a Zacks Rank of 2.
Diageo plc (DEO - Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 8.3%.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
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PepsiCo (PEP) Surpasses Earnings & Revenue Estimates in Q4
PepsiCo, Inc. (PEP - Free Report) had a strong finish to 2020, with fourth-quarter 2020 earnings and sales surpassing estimates and improving year over year. Despite continued challenges related to the coronavirus pandemic, the company’s robust fourth-quarter performance was backed by resilience and strength in its global snacks and foods business as well as accelerated growth in the beverage category.
PepsiCo also gained from its strong portfolio of brands, a responsive supply chain and flexible go-to-market systems, which helped maintain continued supplies amid the coronavirus pandemic.
Shares of this Zacks Rank #3 (Hold) company have declined 4.3% in the past three months compared with the industry’s 0.5% fall.
Quarter in Detail
PepsiCo’s fourth-quarter core earnings per share (EPS) of $1.47 beat the Zacks Consensus Estimate of $1.45 and increased 1.4% year over year. In constant currency, core earnings were up 3% from the year-ago period. The company’s reported EPS of $ 1.33 improved 5% year over year.
Net revenues of $22,455 million improved 8.8% year over year and also surpassed the Zacks Consensus Estimate of $21,996.3 million. On an organic basis, revenues grew 5.7% year over year. Foreign currency impacted revenues and earnings by 2% each in the fourth quarter. Revenues benefited from the continued momentum in the snacking category as well as gains in the beverage business.
Revenues also reflected gains from strong volume growth and robust pricing in the quarter. Total volume increased 3% in the reported quarter. Notably, organic volume improved 3% for the snacks/food business and 5% for the beverage business. Moreover, net pricing was up 3% in the fourth quarter, driven by pricing gains across almost all segments, except for Europe.
PepsiCo, Inc. Price, Consensus and EPS Surprise
PepsiCo, Inc. price-consensus-eps-surprise-chart | PepsiCo, Inc. Quote
On a consolidated basis, reported gross margin contracted 115 basis points (bps), while core gross margin declined 113 bps. Reported operating margin declined 49 bps, while core operating margin was down 55 bps.
Segment Details
On a segmental basis, the company witnessed revenue growth across all segments, except for Latin America. Meanwhile, organic revenues also ascended for all segments.
Reported revenues improved 4% in Europe, 6% in FLNA, 8% in QFNA, 9% in PBNA, 53% in AMESA and 34% in APAC segments, whereas the metric declined 5% in Latin America. Organic revenues increased 8% each at Europe and QFNA segments, while the same was up 5% each for FLNA, AMESA and APAC segments. Further, organic revenues were up 5.5% for PBNA and 4.5% for Latin America.
Operating profit (on a reported basis) grew 2% for FLNA, 23% for QFNA, 24% for APAC and 2% for Europe. However, it declined 10% for Latin America, 11% each for AMESA and PBNA segments.
Financials
The company ended 2020 with cash and cash equivalents of $8,185 million, long-term debt of $40,370 million, and shareholders’ equity (excluding non-controlling interest) of $13,454 million.
Net cash provided by operating activities was $10,613 million as of Dec 26, 2020, compared with $9,649 million as of Dec 28, 2019.
Additionally, the company raised its annualized dividend by 5% to $4.30 per share from the prior dividend rate of $4.09 per share. The hiked dividend will come into force and is expected to be paid out in June 2021.
Outlook
Based on the 2020 performance and evolving business conditions, the company provided guidance for 2021. It expects organic revenue growth in mid-single digits, with core constant currency EPS growth in high-single digits.
It expects core effective tax rate of 21%. Additionally, the company expects currency tailwinds to aid its revenues and core EPS by 1 percentage point in 2021, based on the current rates.
Further, it remains committed to rewarding its shareholders through dividends and share buybacks. It anticipates total cash returns to shareholders of $5.9 million, including $5.8 million of cash dividends and $100 million of share repurchases. The company recently completed its share-repurchase authorization and expects no more share repurchases through the rest of 2021.
Don’t Miss These Better-Ranked Beverage Stocks
Monster Beverage Corporation (MNST - Free Report) , with a long-term earnings growth rate of nearly 12%, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coca Cola Femsa S.A.B. de C.V. (KOF - Free Report) has an expected long-term earnings growth rate of 9.6%. It presently carries a Zacks Rank of 2.
Diageo plc (DEO - Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 8.3%.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Click here to download this report FREE >>