) is set to report fourth quarter 2012 results on Feb 14. Last
quarter it posted a 3.45% positive surprise. Let's see how things
are shaping up for this announcement.
Growth Factors this Past Quarter
Though earnings beat the Zacks Consensus Estimates, they
declined year over year due to a sluggish top line. Revenues
declined in the quarter due to currency headwinds and
re-franchising of the beverage business in China and Mexico.
Excluding these headwinds, organic revenues grew year over year
primarily on the back of price increases. Both snacks and
beverage volumes improved in the quarter. However, beverage
volumes declined in North America.
The overall carbonated soft drinks' (CSD) volumes in North
America have been weak since the past few months. Changing
consumer preferences, increasing health consciousness and growing
regulatory pressures are affecting beverage sales. This is
hurting CSD volumes for PepsiCo as well as other beverage
The Coca-Cola Company
Our proven model does not conclusively show that PepsiCo is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
: The Earnings ESP is 0.0%.
Zacks #3 Rank (Hold).
PepsiCo's Zacks #3 Rank (Hold) lowers the predictive power of ESP
because the Zacks Rank #3 when combined with a 0.0% ESP makes
surprise prediction difficult.
We caution against stocks with Zacks #4 and #5 Ranks (Sell
rated stocks) going into the earnings announcement, especially
when the company is seeing negative estimate revisions
Management expects pricing gains to moderate in the fourth
quarter than the third quarter. The structural changes are
expected to hurt fourth quarter revenues by 2.5%, lower than the
third quarter. Currency is expected to hurt both revenue and
operating profit by approximately 1% in the fourth quarter,
significantly lesser than the third quarter. The lower headwinds
from currency and structural changes could result in better
top-line growth in the fourth quarter. Commodity inflation is
also expected to moderate in the fourth quarter.
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows they have the right combination of elements to post
an earnings beat this quarter:
Coca-Cola FEMSA S.A.B de C.V
), with an Earnings ESP of +7.87% and a Zacks Rank #2 (Buy)
), with an Earnings ESP of +0.97% and a Zacks Rank #2 (Buy)
KELLOGG CO (K): Free Stock Analysis Report
COCA COLA CO (KO): Free Stock Analysis Report
COCA-COLA FEMSA (KOF): Free Stock Analysis
PEPSICO INC (PEP): Free Stock Analysis Report
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