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PepsiCo (PEP) Q4 Earnings In Line, Revenues Beat Estimates
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PepsiCo, Inc. (PEP - Free Report) reported robust fourth-quarter 2021 results, wherein earnings were in line with estimates but revenues beat the same. Both the 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 of global beverage and convenient food businesses.
For full-year 2021, the company reported organic revenue growth of 9.5% and core constant-currency earnings per share (EPS) growth of 12%.
Shares of the Zacks Rank #4 (Sell) company have risen 27.4% in the past year compared with the industry’s 19.4% rally.
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Quarter in Detail
PepsiCo’s fourth-quarter core EPS of $1.53 was in line with the Zacks Consensus Estimate and increased 4.1% year over year. In constant currency, core earnings were up 4% from the year-ago period. The company’s reported EPS of 95 cents declined 28.6% year over year.
Net revenues of $25,248 million improved 12.4% year over year and surpassed the Zacks Consensus Estimate of $24,285 million. Revenues benefited from volume growth and robust price/mix in the reported quarter. Unit volume improved 4% and 7% year over year for convenient food and beverage businesses, respectively.
On an organic basis, revenues grew 11.9% year over year, driven by broad-based growth across categories and geographies. Consolidated organic volume was up 5% and price/mix improved 7% year over year for the fourth quarter. Pricing gains were driven by strong realized prices across all segments, except APAC.
Revenues were aided by acceleration across both global beverage and convenient food businesses. On a year-over-year basis, organic revenues grew 11% for the beverage business and 13% for the convenient food business. Region-wise, organic revenues improved 12% for the North America business and 11% for the international business.
On a consolidated basis, the reported gross profit increased 9.1% year over year to $13,118 million. Core gross profit rose 10% year over year to $13,194 million. The reported gross margin contracted 161 basis points (bps) while core gross margin declined 122 bps.
The reported operating income of $2,562 million was down 9.3% year over year. Core operating income declined 3.8% year over year to $2,740 million and core constant-currency operating income fell 4%. The reported operating margin fell 244 bps while core operating margin declined 183 bps. The soft margin performance can be attributed to impacts of supply-chain disruptions and inflationary pressures from labor, transportation as well as commodity costs. Additionally, operating margin was impacted by double-digit growth in advertising and marketing expenses and other planned business investments.
Segment Details
On a segmental basis, the company witnessed revenue growth across all segments. Organic revenues also ascended for all segments. Revenues for the QFNA segment remained flat with the last year, on both reported and organic basis.
Revenues, on a reported basis, improved 13% in FLNA, 9% in QFNA, 13% in PBNA, 16% in Latin America, 8% in Europe, 13% in AMESA and 18% in APAC segments. Organic revenues increased 13% for FLNA, 9% for QFNA, 12% for PBNA, 17% for Latin America, 9% for Europe, 8% for AMESA and 13% for APAC segments.
Operating profit (on a reported basis) increased 10% for FLNA, 8% for QFNA and 21% for Latin America. Yet, it declined 10% for PBNA, 16% for Europe, 29% for AMESA and 25% for APAC.
Financials
The company ended 2021 with cash and cash equivalents of $5,596 million, long-term debt of $36,026 million, and shareholders’ equity (excluding non-controlling interest) of $16,043 million.
Net cash used in operating activities was $11,616 million as of Dec 25, 2021 compared with $10,613 million on Dec 26, 2020.
PEP announced a 7% increase in its annualized dividend to $4.60 per share from $4.30. The raised dividend will be paid out in June 2022. This marks PEP’s 50th consecutive dividend increase.
Outlook
Looking into 2022, PepsiCo expects to retain the strength and momentum witnessed in 2021. It expects to benefit from the continued shift of consumer preferences toward convenience, variety and portion control. The company expects its products and packages to benefit from this trend. Yet, it anticipates persistent headwinds from commodity, transportation and labor cost inflation. PEP anticipates mitigating these impacts from revenue management capabilities and productivity initiatives.
For 2022, PepsiCo anticipates organic revenue growth of 6%, which is at the high-end of its long-term target. This is likely to reflect significant growth in organic revenues on a two-year basis. Core constant-currency earnings per share are expected to increase 8% from a year ago. Consequently, it estimates core earnings per share of $6.67 for 2022, representing a 6.5% increase from $6.26 reported in 2021.
Core earnings per share are anticipated to reflect the impacts of inflationary costs across the value chain and planned investments in its business. PEP expects currency headwinds to hurt revenues and core earnings per share by 1.5 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.
Don’t Miss These Better-Ranked Stocks
We have highlighted three better-ranked companies in the Beverages space, namely Brown-Forman (BF.B - Free Report) , Diageo (DEO - Free Report) and Bespoke Capital Acquisition (VWE - Free Report) .
Brown-Forman, based in Louisville, KY, manufactures, distills, bottles, imports, exports, markets and sells a wide variety of alcoholic beverages under recognized brands. The company presently flaunts a Zacks Rank #2 (Buy). BF.B has declined 11.1% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Brown-Forman’s sales and EPS for the current financial year suggests growth of 7.9% and 3.1%, respectively, from the year-ago reported levels. BF.B has a trailing four-quarter negative earnings surprise of 5.3%, on average.
Diageo, involved in producing, distilling, brewing, bottling, packaging as well as distributing spirits, wine, and beer, presently holds a Zacks Rank #2. Shares of DEO have risen 24.2% in the past year.
The Zacks Consensus Estimate for Diageo’s sales and EPS for the current financial year suggests respective growth of 32.1% and 15.9% from the year-ago reported figures. DEO has an expected EPS growth rate of 9.2% for three to five years.
Bespoke Capital, a producer and seller of wines and craft spirits in the United States, Canada, and internationally, presently carries a Zacks Rank #2. Shares of VWE have declined 17.1% in the past year.
The Zacks Consensus Estimate for Bespoke Capital’s sales and EPS for the current financial year suggests respective growth of 147.9% and 29.7% from the year-ago reported figures.
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PepsiCo (PEP) Q4 Earnings In Line, Revenues Beat Estimates
PepsiCo, Inc. (PEP - Free Report) reported robust fourth-quarter 2021 results, wherein earnings were in line with estimates but revenues beat the same. Both the 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 of global beverage and convenient food businesses.
For full-year 2021, the company reported organic revenue growth of 9.5% and core constant-currency earnings per share (EPS) growth of 12%.
Shares of the Zacks Rank #4 (Sell) company have risen 27.4% in the past year compared with the industry’s 19.4% rally.
Quarter in Detail
PepsiCo’s fourth-quarter core EPS of $1.53 was in line with the Zacks Consensus Estimate and increased 4.1% year over year. In constant currency, core earnings were up 4% from the year-ago period. The company’s reported EPS of 95 cents declined 28.6% year over year.
Net revenues of $25,248 million improved 12.4% year over year and surpassed the Zacks Consensus Estimate of $24,285 million. Revenues benefited from volume growth and robust price/mix in the reported quarter. Unit volume improved 4% and 7% year over year for convenient food and beverage businesses, respectively.
On an organic basis, revenues grew 11.9% year over year, driven by broad-based growth across categories and geographies. Consolidated organic volume was up 5% and price/mix improved 7% year over year for the fourth quarter. Pricing gains were driven by strong realized prices across all segments, except APAC.
PepsiCo, Inc. Price, Consensus and EPS Surprise
PepsiCo, Inc. price-consensus-eps-surprise-chart | PepsiCo, Inc. Quote
Revenues were aided by acceleration across both global beverage and convenient food businesses. On a year-over-year basis, organic revenues grew 11% for the beverage business and 13% for the convenient food business. Region-wise, organic revenues improved 12% for the North America business and 11% for the international business.
On a consolidated basis, the reported gross profit increased 9.1% year over year to $13,118 million. Core gross profit rose 10% year over year to $13,194 million. The reported gross margin contracted 161 basis points (bps) while core gross margin declined 122 bps.
The reported operating income of $2,562 million was down 9.3% year over year. Core operating income declined 3.8% year over year to $2,740 million and core constant-currency operating income fell 4%. The reported operating margin fell 244 bps while core operating margin declined 183 bps. The soft margin performance can be attributed to impacts of supply-chain disruptions and inflationary pressures from labor, transportation as well as commodity costs. Additionally, operating margin was impacted by double-digit growth in advertising and marketing expenses and other planned business investments.
Segment Details
On a segmental basis, the company witnessed revenue growth across all segments. Organic revenues also ascended for all segments. Revenues for the QFNA segment remained flat with the last year, on both reported and organic basis.
Revenues, on a reported basis, improved 13% in FLNA, 9% in QFNA, 13% in PBNA, 16% in Latin America, 8% in Europe, 13% in AMESA and 18% in APAC segments. Organic revenues increased 13% for FLNA, 9% for QFNA, 12% for PBNA, 17% for Latin America, 9% for Europe, 8% for AMESA and 13% for APAC segments.
Operating profit (on a reported basis) increased 10% for FLNA, 8% for QFNA and 21% for Latin America. Yet, it declined 10% for PBNA, 16% for Europe, 29% for AMESA and 25% for APAC.
Financials
The company ended 2021 with cash and cash equivalents of $5,596 million, long-term debt of $36,026 million, and shareholders’ equity (excluding non-controlling interest) of $16,043 million.
Net cash used in operating activities was $11,616 million as of Dec 25, 2021 compared with $10,613 million on Dec 26, 2020.
PEP announced a 7% increase in its annualized dividend to $4.60 per share from $4.30. The raised dividend will be paid out in June 2022. This marks PEP’s 50th consecutive dividend increase.
Outlook
Looking into 2022, PepsiCo expects to retain the strength and momentum witnessed in 2021. It expects to benefit from the continued shift of consumer preferences toward convenience, variety and portion control. The company expects its products and packages to benefit from this trend. Yet, it anticipates persistent headwinds from commodity, transportation and labor cost inflation. PEP anticipates mitigating these impacts from revenue management capabilities and productivity initiatives.
For 2022, PepsiCo anticipates organic revenue growth of 6%, which is at the high-end of its long-term target. This is likely to reflect significant growth in organic revenues on a two-year basis. Core constant-currency earnings per share are expected to increase 8% from a year ago. Consequently, it estimates core earnings per share of $6.67 for 2022, representing a 6.5% increase from $6.26 reported in 2021.
Core earnings per share are anticipated to reflect the impacts of inflationary costs across the value chain and planned investments in its business. PEP expects currency headwinds to hurt revenues and core earnings per share by 1.5 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.
Don’t Miss These Better-Ranked Stocks
We have highlighted three better-ranked companies in the Beverages space, namely Brown-Forman (BF.B - Free Report) , Diageo (DEO - Free Report) and Bespoke Capital Acquisition (VWE - Free Report) .
Brown-Forman, based in Louisville, KY, manufactures, distills, bottles, imports, exports, markets and sells a wide variety of alcoholic beverages under recognized brands. The company presently flaunts a Zacks Rank #2 (Buy). BF.B has declined 11.1% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Brown-Forman’s sales and EPS for the current financial year suggests growth of 7.9% and 3.1%, respectively, from the year-ago reported levels. BF.B has a trailing four-quarter negative earnings surprise of 5.3%, on average.
Diageo, involved in producing, distilling, brewing, bottling, packaging as well as distributing spirits, wine, and beer, presently holds a Zacks Rank #2. Shares of DEO have risen 24.2% in the past year.
The Zacks Consensus Estimate for Diageo’s sales and EPS for the current financial year suggests respective growth of 32.1% and 15.9% from the year-ago reported figures. DEO has an expected EPS growth rate of 9.2% for three to five years.
Bespoke Capital, a producer and seller of wines and craft spirits in the United States, Canada, and internationally, presently carries a Zacks Rank #2. Shares of VWE have declined 17.1% in the past year.
The Zacks Consensus Estimate for Bespoke Capital’s sales and EPS for the current financial year suggests respective growth of 147.9% and 29.7% from the year-ago reported figures.