Earnings Cheat Sheet: Does Pepsi Quench Investors’ Thirst for Earnings?

Thursday, before the opening bell, Pepsi (PEP) reported Q3 earnings. Pepsi is the second largest soft drink manufacturer in the world. Pepsi also produces SunChips, Fritos, Cheetos, Gatorade, and Quaker Foods. Last year, Pepsi agreed to purchase two of its bottlers in order to reduce costs and move products to the market quicker. Analysts were expecting EPS of $1.22, compared to an EPS of $1.08 prior year.

Pepsi reported Earnings Per Share of $1.19 for Q3. Excluding the costs associated with purchasing its bottlers ( and other one-time items), the company earned $1.22 per share, which is exactly what analysts were expecting. In the previous quarters of the year, Pepsi had beat estimates every time. The company is on pace for 11% to 12% EPS growth for 2010, previously, the company expected 11% to 13%. The Street appeared disappointed with the results as the stock fell about 2.5% in pre-market trading. In the previous trading session, PEP closed at a 52 week high of $68.11.

Revenues for Q3 were $15.51 billion, which beat analysts estimates of $15.38 billion. Revenue gains were reported for all product lines except for Quaker. Revenues were able to beat estimates due to its international operations ( 40% of revenues come from outside North America).

Prior to Q3 earnings, Pepsi has seen its stock rise 12% for 2010, Coke (NYSE: KO) has only seen about a 5% rise in stock price.

Going forward, Pepsi has the consumer in mind. The company announced plans for a new Global Nutrition Group to help satisfy health consensus consumers. Pepsi has plans to reduce the amount of saturated fat per serving in key global food brands by 15% by 2020, and sodium content by 25%. CEO Ms. Nooyi had the following to say, ” The creation of this Global Nutrition Group is part of our long-term strategy to grow our nutrition businesses from about $10 billion in revenues today to $30 billion by 2020.”

Pepsi continues to show investors the money. Year-to-date cash flow from operations are up 31% to $5.8 billion. Management operating cash flow (excluding certain items) increased 29% to $5.3 billion. Earlier in the year, Pepsi also increased its dividend by 7%, brining the annual dividend to $1.92. Investors should consider Pepsi as it continues to show itself as a stable drink and snack food company in the global environment.

Disclosure: No positions.

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