PepsiCo Earnings: Margins Finally Expand, but Net Income Falls

S&P 500 (NYSE:SPY) component PepsiCo Inc. (NYSE:PEP) reported its results for the third quarter. PepsiCo is a global company that manufactures a variety of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages, and foods.

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PepsiCo Inc. Earnings Cheat Sheet

Results: Net income for the beverages-soft fell to $1.9 billion ($1.21 per share) vs. $2 billion ($1.25 per share) a year earlier. This is a decline of 4.9% from the year-earlier quarter.

Revenue: Fell 5.3% to $16.65 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: PepsiCo Inc. beat the mean analyst estimate of $1.09 per share. Analysts were expecting revenue of $16.66 billion.

Quoting Management: “PepsiCo is diligently executing the strategy we set forth at the start of the year, and we remain on track to achieve our full-year targets,” said PepsiCo Chairman and CEO Indra Nooyi. “Our disciplined pricing and sustained investment in brand building drove five percent organic net revenue growth reflecting one percent organic volume growth and four percent effective net pricing.”

Key Stats:

The company has now topped analyst estimates for the last four quarters. It beat the mark by 2 cents in the second quarter, by 2 cents in the first quarter, and by 2 cents in the fourth quarter of the last fiscal year.

The company’s net income has fallen for the last three quarters. In the second quarter, net income fell 21.1% from the year earlier, while the figure fell 1.4% in the first quarter.

Last quarter, gross margins grew to 53%, a one percentage points difference from the year-earlier quarter. This breaks a streak of two consecutive quarters of shrinking margins.

Revenue has fallen in the past two quarters. In the second quarter, revenue declined 2.2% to $16.46 billion from the year-earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from $1.22 a share to $1.20 over the last ninety days. Over the past sixty days, the average estimate for the fiscal year has reached $4.06 per share, a decline from $4.10.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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