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PepsiCo Earnings Beats Overall, Lifts View: ETFs to Benefit
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PepsiCo Inc. (PEP - Free Report) reported robust third-quarter 2023 results, wherein revenues and earnings surpassed the Zacks Consensus Estimate. The top and bottom lines also improved year over year.
The strong results reflect gains from strength and resilience in its categories, diversified portfolio, modernized supply chain, improved digital capabilities, flexible go-to-market distribution systems, and robust consumer demand trends. Shares gained 1.9% on Oct 10, reflecting a better-than-expected earnings result.
The company also gained from the robust performance in the global beverage and convenient food businesses. Driven by strong results and business momentum, the company has raised its core constant-currency earnings per share (EPS) view for 2023.
PepsiCo has considerable exposure to funds like Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report) and Vanguard Consumer Staples ETF (VDC - Free Report) . Each of these funds added about 1% on Oct 10.
Quarter in Detail
PepsiCo’s third-quarter core EPS of $2.25 beat the Zacks Consensus Estimate of $2.17 and increased 14.2% year over year. In constant currency, core earnings improved 16% from the year-ago period. Adverse currency rates impacted EPS by 2% in the quarter.
Net revenues of $23,453 million improved 6.7% year over year, surpassing the Zacks Consensus Estimate of $23,378 million. Revenues benefited from a robust price/mix in the reported quarter. Unit volume declined 1.5% year over year for the convenient food business and was flat year over year for the beverage business.
On an organic basis, revenues grew 8.8% year over year, driven by broad-based growth across categories and geographies. This marked the 10th straight quarter of at least high-single-digit organic revenue growth for the company. The consolidated organic volume was down 2.5%, while effective net pricing improved 11% in the third quarter. Pricing gains were driven by strong realized prices across all segments.
Outlook
PepsiCo raised its core EPS guidance for 2023. The company reaffirms its organic revenue growth prediction of 10% for 2023. It now anticipates core constant-currency EPS growth of 13% from the year-ago period’s reported figure versus 12% growth stated earlier.
PEP expects currency headwinds to hurt revenues and core EPS by 2 percentage points in 2023, based on the current rates. The company expects a core effective tax rate of 20% for 2023.
Based on the above assumption, PepsiCo expects a core EPS of $7.54 for 2023 compared with the $7.47 mentioned earlier. This suggests an 11% increase from the core EPS of $6.79 reported in 2022 compared with 10% growth expected earlier.
PepsiCo has been committed to rewarding shareholders through dividends and share buybacks. It expects to return a value worth $7.7 billion in 2023, including $6.7 billion of dividends. Additionally, the company plans to repurchase shares worth $1.0 billion in 2023.
The company also outlined its initial view for 2024. It expects to deliver organic revenue and core constant currency EPS growth at the upper end of its long-term guidance ranges for 2024. The company had earlier predicted organic revenue growth of 4-6% and core constant currency EPS growth of high-single digit over the long term.
Bottom Line
Pepsico has underperformed the broader sector lately. Hence, investors who do not have a strong stomach for risks may bet on Pepsico-heavy ETFs.
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PepsiCo Earnings Beats Overall, Lifts View: ETFs to Benefit
PepsiCo Inc. (PEP - Free Report) reported robust third-quarter 2023 results, wherein revenues and earnings surpassed the Zacks Consensus Estimate. The top and bottom lines also improved year over year.
The strong results reflect gains from strength and resilience in its categories, diversified portfolio, modernized supply chain, improved digital capabilities, flexible go-to-market distribution systems, and robust consumer demand trends. Shares gained 1.9% on Oct 10, reflecting a better-than-expected earnings result.
The company also gained from the robust performance in the global beverage and convenient food businesses. Driven by strong results and business momentum, the company has raised its core constant-currency earnings per share (EPS) view for 2023.
PepsiCo has considerable exposure to funds like Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report) and Vanguard Consumer Staples ETF (VDC - Free Report) . Each of these funds added about 1% on Oct 10.
Quarter in Detail
PepsiCo’s third-quarter core EPS of $2.25 beat the Zacks Consensus Estimate of $2.17 and increased 14.2% year over year. In constant currency, core earnings improved 16% from the year-ago period. Adverse currency rates impacted EPS by 2% in the quarter.
Net revenues of $23,453 million improved 6.7% year over year, surpassing the Zacks Consensus Estimate of $23,378 million. Revenues benefited from a robust price/mix in the reported quarter. Unit volume declined 1.5% year over year for the convenient food business and was flat year over year for the beverage business.
On an organic basis, revenues grew 8.8% year over year, driven by broad-based growth across categories and geographies. This marked the 10th straight quarter of at least high-single-digit organic revenue growth for the company. The consolidated organic volume was down 2.5%, while effective net pricing improved 11% in the third quarter. Pricing gains were driven by strong realized prices across all segments.
Outlook
PepsiCo raised its core EPS guidance for 2023. The company reaffirms its organic revenue growth prediction of 10% for 2023. It now anticipates core constant-currency EPS growth of 13% from the year-ago period’s reported figure versus 12% growth stated earlier.
PEP expects currency headwinds to hurt revenues and core EPS by 2 percentage points in 2023, based on the current rates. The company expects a core effective tax rate of 20% for 2023.
Based on the above assumption, PepsiCo expects a core EPS of $7.54 for 2023 compared with the $7.47 mentioned earlier. This suggests an 11% increase from the core EPS of $6.79 reported in 2022 compared with 10% growth expected earlier.
PepsiCo has been committed to rewarding shareholders through dividends and share buybacks. It expects to return a value worth $7.7 billion in 2023, including $6.7 billion of dividends. Additionally, the company plans to repurchase shares worth $1.0 billion in 2023.
The company also outlined its initial view for 2024. It expects to deliver organic revenue and core constant currency EPS growth at the upper end of its long-term guidance ranges for 2024. The company had earlier predicted organic revenue growth of 4-6% and core constant currency EPS growth of high-single digit over the long term.
Bottom Line
Pepsico has underperformed the broader sector lately. Hence, investors who do not have a strong stomach for risks may bet on Pepsico-heavy ETFs.