PepsiCo (PEP) 2Q Earnings Beat Estimates; Stock Rises


The shares of PepsiCo, Inc. (NYSE:PEP) are trading higher today after reporting earnings for the second quarter that beat the expectations of Wall Street analyst. The company also increased its forecast for 2016.

The stock price of PepsiCo climbed 2% to $108.02 per share around 12:26 in the afternoon in New York. The company gained more than 8% year-to-date based on data from Google Finance.

PepsiCo financial results

PepsiCo reported a 2% increase core earnings of $1.35 per share excluding some item. Analysts expected the company to deliver earnings of $1.29 per share.  The company explained that its deconsolidation of its operations in Venezuela had a 3% negative impact on its reported and core earnings per share (EPS). PepsiCo’s reported EPS was $1.38 per share, up by 4%.

The company’s revenue for the quarter dropped 3.3% to $15.4 billion due to the impact of foreign exchange translation and the deconsolidation of its Venezuelan operations. Its revenue still met the average estimate of analysts.

PepsiCo said its gross margin grew 115 basis points and its reported operating margin expanded 105 basis points. The company’s cash flow provided by operating activities was $2.8 billion.

According to the company, the sales of its Frito-Lay North America unit climbed 3.2% to $3.56 billion. The sales of its North America Beverages unit increased 0.6% to $5.15 billion.

PepsiCo also reported that its Propel enhanced water brand and Naked Cold Pressed Juice together with its new varieties of Tostito chips had positive contributions to its financial performance.

PepsiCo Chairman and CEO Indra Nooyi said, “In what continues to be an incredibly volatile global macro environment, we are pleased with our results for the second quarter. She added that they delivered balanced volume growth and positive price/mix” driven by their relentless execution of their commercial agenda and leading to solid organic revenue growth despite the negative impact of foreign exchange translation and deconsolidation of the company’s operations in Venezuela.

Full-year 2016 outlook

“Our focus on driving greater efficiency throughout our operations contributed significantly to attractive margin expansion while we continued to invest in our business. Based on our year-to-date performance, we are raising our full-year core constant currency EPS growth objective,” said Nooyi.

PepsiCo expected to achieve earnings of $.71 per share for 2016 and approximately 4% organic revenue growth. The company expected its productivity savings to be around $1 billion, cash flow from operating activities to be more than $10 billion and free cash flow of more than $7 billion.

The company expected to return total of approximately $7 billion to shareholders through dividends of around $4 billion and stock buyback of approximately $3 billion.