PepsiCo (PEP) Beats Q4 Earnings Estimates, Issues 2018 View

PepsiCo, Inc. (PEP – Free Report) reported fourth-quarter 2017 (ending Dec 30) results, with earnings and revenues beating the Zacks Consensus Estimate. Notably, this is the seventh consecutive quarter of positive earnings surprise. Improvement in the snack business helped offset continued weakness at the company’s beverage business amid “rapidly shifting consumer landscape”.

Earnings

PepsiCo’s fourth-quarter core earnings per share (EPS) of $1.31 beat the Zacks Consensus Estimate of $1.30 and increased 9% year over year, mainly driven by better operating efficiency. In constant currency terms, adjusted earnings grew 8%.

Core earnings exclude restructuring and impairment charges and commodity mark-to-market net impact. The company reported a loss of 50 cents per share due to a $2.5 billion one-time charge related to new U.S. tax laws. The reported loss reflects a decrease of 152% year over year. Foreign exchange translation had a positive impact of 1% on reported EPS.

Revenues

Net revenues of $19.53 billion remain unchanged with the year-ago level. Foreign exchange (Fx) had a positive impact on revenues growth of 1% and pricing had a positive impact of 2%. Reported revenues also topped the Zacks Consensus Estimate of $19.44 billion.

Excluding the impact of Fx, revenues increased 2.3% on an organic basis, primarily driven by higher demand for food/snacks in the Asia, Middle East and North Africa (AMENA), Europe Sub-Saharan Africa (ESSA), Latin America and Frito-Lay North America (FLNA) segments. Notably, overall organic sales growth was better than the 1.7% rise recorded in the previous quarter.

Total volumes remained unchanged during the quarter against 1% growth in the previous quarter. While organic snacks/food increased 2% (better than 1% growth witnessed in the third quarter), beverage volumes dropped 2% (versus down 1%).

Quarterly Segment Details

Revenues decreased 1% at the Frito-Lay segment, 5% at Quaker Foods (QFNA) and 6% at North America Beverages (NAB). However, revenues improved 6% in Latin America and 11% in ESSA segments. Meanwhile, revenues at AMENA remained unchanged.