Can PepsiCo (PEP) Retain Positive Earnings Trend In Q4?
Zacks Investment Research | Feb 10, 2019 09:15PM ET
PepsiCo, Inc. (NASDAQ:PEP) is set to report fourth-quarter 2018 results on Feb 15, before the market opens. In the last reported quarter, the company delivered a positive earnings surprise of 1.9%. Additionally, it surpassed estimates consecutively for the last 11 quarters. Thus, it has average positive earnings surprise of 3.4% for the trailing four quarters.
Moreover, the Zacks Consensus Estimate for earnings in fourth-quarter is pegged at $1.49, mirroring 13.7% year-over-year growth. Notably, the consensus estimate has remained unchanged in the past 30 days.
Pepsico, Inc. Price and EPS Surprise
industry ’s growth of 4.5%. This reflects a positive sentiment on the stock ahead of the earnings release.
However, we cannot ignore the industry-wide sluggishness in the carbonated soft-drinks category (CSD). Consumers’ awareness regarding health and wellness, new taxes on sugar-sweetened beverages, and rising regulatory pressure affecting CSD sales have been major concerns for the industry. Additionally, rising commodity and transportation costs have been hurting the company’s margins.
PepsiCo expects the soft margin trends to continue through the rest of 2018, owing to inflationary input costs and higher investments to drive business growth. Further, it adjusted full-year earnings per share projections to reflect the anticipated unfavorable impact of foreign exchange due to the recent strengthening of the U.S. dollar.
Currency is projected to have negative impact of nearly 1 percentage point on top and bottom lines. Including the negative currency impact, PepsiCo now expects core earnings per share of $5.65, reflecting an 8% increase from earnings of $5.23 in 2017. Earlier, the company anticipated core earnings per share of $5.70, indicating 9% growth.
Earnings Whisper
Here is what our quantitative model predicts:
PepsiCo does not have the right combination of the two key ingredients — a positive Original post
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