Pepsico Inc. (PEP), one of the world’s leading manufacturers of foods, snacks, and carbonated and non-carbonated beverages, is scheduled to report its second-quarter and full year 2010 financial results on Thursday, July 21, 2011. The current Zacks Consensus Estimate for the quarter is $1.21 a share. The Zacks Consensus Estimate for revenues for the quarter in question is $16,338 million.
Third-Quarter 2010: A Synopsis
Pepsico, which faces stiff competition from Coca Cola Company (KO) and Kraft Foods Inc. (KFT), posted poor results for the first quarter of 2011 as earnings sank 2.6% year-over-year to 74 cents per share. However , EPS beat the Zacks Consensus Estimate of 73 cents per share by one penny. Earnings were primarily impacted by continued commodity cost inflation and macroeconomic ambiguity.
Net sales jumped 27% to $11,937 million in the quarter from $9,368 million in the prior-year quarter, demonstrating strong growth across all businesses. Revenues were also above the Zacks Consensus Estimate of $11,433 million.
Management Guidance
Pepsi at its last earnings conference call had reiterated full-year earnings per share growth of 7%–8% based on core constant currency compared with its fiscal 2010 earnings of $4.13 per share. The current Zacks Consensus Estimate for fiscal 2010 is $4.49.
Beyond 2011, PepsiCo expects high-single-digit earnings per share growth, reflecting continued commodity cost inflation and macroeconomic ambiguity.
Second-Quarter 2011 Zacks Consensus
Analysts’ opinion considered by Zacks states that Pepsi is expected to post second-quarter 2011 earnings of $1.21 a share. The current Zacks Consensus Estimate represents a year-over-year improvement of 10.0%. The estimates as per the Zacks Consensus for the quarter range from a low of $1.18 to a high of $1.23.
The current Zacks Consensus Estimate did not change over the last 30 days as none of the analysts revised their estimates. However, Zacks Consensus Estimate dipped from $1.22 to $1.21 in the last 90 days.
Earnings History Outpaces Zacks
With respect to earnings surprises, Pepsico has topped the Zacks Consensus Estimate over the last four quarters. The earnings ranged within 0.00% to 1.37% with an average of negative 1.08%. This suggests that Pepsi has outperformed the Zacks Consensus Estimate by that measure.
Pepsi in Neutral Lane
A strong new product pipeline, robust international sales, on-going manufacturing productivity initiatives, and an active stock program are all positives for PepsiCo. The Asia Pacific markets, such as China and India, are leading the way with double-digit volume increases in snacks and beverages.
However, Pepsico’s vulnerability to currency translations during times of U.S. dollar strength and the possibility of the company facing an inflationary impact of approximately $1.4 billion to $1.8 billion on a base of $18 billion of commodity base are a concern.
Currently, we prefer to be Neutral on the stock. Further, Pepsi holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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PEPSICO INC (PEP): Free Stock Analysis Report
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