PepsiCo, Inc. (NYSE: PEP)
Earnings Report
PepsiCo (PEP) reported an earnings beat before the market opened on Tuesday that sent the share price surging despite the impact of their accounting changes in its Venezuelan business. PEP reported profit of 36 cents per share on $533 million in profit, down from $1.32 per share on $2.01 billion for the same period ending a year earlier. Profits are down this quarter only because they decided to take a big hit by writing off investments in its Venezuelan subsidiaries, resulting in a 92 cent per share reduction in earnings. Analyst expected earnings of $1.26 per share on $16.15 billion in revenues according to Thomson Reuters. Investors were most interested in the outlook PEP released with earnings that stated they are increasing their EPS growth target to 9% from 8% and that they are on track to deliver roughly $1 billion in productivity savings and $9 billion in cash returns to shareholders.
Chairman and CEO Indra Nooyi stated:
“In the third quarter, organic revenue grew 7.4%, with Global Snacks up 10% and Global Beverages up 5%. Core gross margin improved by 120 basis points. Core constant currency operating profit increased 12% and core constant currency EPS increased 14% . . . Based on our year-to-date performance, and our outlook for the balance of the year, we are increasing our full year 2015 core constant currency EPS growth outlook to 9%. Also we now plan to return approximately $9 billion to shareholders through dividends and buybacks with share buybacks at the high-end of the range, we had guided to. Hugh will go into additional details of our guidance later.” SeekingAlpha
This was a great earnings release for PEP and gives investors something to look forward to. With a new catalyst moving this stock up, keep an eye open for good opportunities to make your entry.
PEP Technicals
Shares of PEP got a nice pop in the premarket after their earnings release as shares traded all the way up to $99.40 before trading off for the rest of the day and closing at $97.07. Prices surged past the 200 day moving average which will now become support at $95.82. This is the catalyst traders were looking for to possibly test new highs. Currently the highs for the year are sitting at $100.76 with lows all the way down at $76.48. All major moving averages are starting to point north again along with the RSI which is closing in on the overbought range currently sitting at 68.82. You’ll see some resistance come in at the big $100 level and at the $99 level as that has proven to be resistance on the longer term scale. Support will be met at the 200 day moving average and $97 level as well. I wouldn’t be surprised to see it back off a little bit after that big move on earnings day.
Looking at PEP on a longer term basis you can see that share prices have been range bound most of the year between the $93 and $100 levels. With the recent market selloff, prices of PEP took a steep dive hitting lows of $76.48 before retracing and stabilizing in the low $90 range. It looks like share prices have split the time for the year both above and below the 200 day moving average as there hasn’t been a catalyst to push this stock in either direction until now. Overall, analysts remain bullish with an average price target of $104.62.
Company Profile
PepsiCo, Inc. markets, sells and distributes a wide variety of convenient and enjoyable foods and beverages through its operations, authorized bottlers, contract manufacturers and other partners. The company operates in four business units, PepsiCo Americas Foods, PepsiCo Americas Beverages, PepsiCo Europe and PepsiCo Asia, Middle East and Africa which are comprised of six reportable segments: Frito-Lay North America, Quaker Foods North America, Latin America Foods, PepsiCo Americas Beverages, PepsiCo Europe and PepsiCo Asia, Middle East and Africa. The Frito-Lay North America segment makes, markets, sells and distributes branded snack foods. These foods include Lay’s potato chips, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, branded dips, Ruffles potato chips, Fritos corn chips and Santitas tortilla chips. The Quaker Foods North America segment makes, markets, sells and distributes cereals, rice, pasta, dairy and other branded products. Its products include Quaker oatmeal, Aunt Jemima mixes and syrups, Quaker Chewy granola bars, Quaker grits, Cap’n Crunch cereal, Life cereal, Quaker rice cakes, Rice-A-Roni side dishes, Near East side dishes and Pasta Roni side dishes. The Latin America Foods segment makes, markets, sells and distributes a number of snack food brands including Marias Gamesa, Cheetos, Doritos, Ruffles, Emperador, Saladitas, Elma Chips, Rosquinhas Mabel, Sabritas and Tostitos, as well as many Quaker-branded cereals and snacks. The PepsiCo Americas Beverages segment makes, markets, sells and distributes beverage concentrates, fountain syrups and finished goods under various beverage brands including Pepsi, Mountain Dew, Gatorade, Diet Pepsi, Aquafina, 7UP, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist and Mirinda. The PepsiCo Europe segment makes, markets, sells and distributes a number of leading snack foods including Lay’s, Walkers, Doritos, Cheetos and Ruffles, as well as many Quaker-branded cereals and snacks, through consolidated businesses as well as through noncontrolled affiliates. The PepsiCo Asia, Middle East and Africa segment makes, markets, sells and distributes a number of leading snack food brands including Lay’s, Chipsy, Kurkure, Doritos, Cheetos and Smith’s through consolidated businesses as well as through noncontrolled affiliates. PepsiCo was founded by Donald M. Kendall Sr. and Herman W. Lay in 1965 and is headquartered in Purchase, NY. MarketWatch
