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PepsiCo (PEP) Down 1.4% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for PepsiCo (PEP - Free Report) . Shares have lost about 1.4% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
PepsiCo Surpasses Earnings & Revenue Estimates in Q4
PepsiCo 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, PepsiCo has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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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PepsiCo (PEP) Down 1.4% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for PepsiCo (PEP - Free Report) . Shares have lost about 1.4% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
PepsiCo Surpasses Earnings & Revenue Estimates in Q4
PepsiCo 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, PepsiCo has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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.