PepsiCo, Inc.PEP reported better-than-expected results in fourth-quarter 2016 (ending Dec 31), with earnings beating the Zacks Consensus Estimate and revenues missing the same.
Moreover, this Purchase, NY-based food/beverage giant provided its full-year 2017 earnings guidance.
PepsiCo's fourth-quarter core earnings per share (EPS) of $1.20 beat the Zacks Consensus Estimate of $1.16 by 3.4%.
Earnings rose 13.2% year over year despite the adverse impact of currency headwinds on sales. Also, currency hurt earnings by 3%. In constant currency terms, adjusted earnings grew 15% on strong margins and decent sales growth.
Notably, core earnings exclude restructuring and impairment charges and also commodity mark-to-market net impact. Including this item, reported earnings came in at 97 cents per share, down 17% year over year.
Full-year 2016 core EPS came in at $4.85, beating the Zacks Consensus Estimate of $4.80 and increasing 6% year over year. At constant currency, adjusted earnings grew 9%.
Total sales improved 5% year over year to $19.52 billion. Foreign exchange (Fx) hurt revenue growth by 2% while the 53rd reporting week had a 3.5% positive impact on sales. Revenues however missed the Zacks Consensus Estimate of $19.61 billion by 0.5%.
Excluding the impact of Fx and the 53rd reporting week, revenues increased 3.7% on an organic basis, primarily driven by higher demand for beverages and food/snacks in Latin America and Asia, Middle East and North Africa ("AMENA"). However, organic sales growth was lower than the 4.2% rise recorded in the previous quarter.
Total volumes grew 2%, same as the previous quarter. While organic snacks/food remained on par with the last quarter, growing 3%, beverage volumes were softer in comparison, rising 1% (compared with 2% in the previous quarter).
Full-year 2016 revenues were $62.79 billion, down 0.4% year over year but almost in line with the Zacks Consensus Estimate of $62.78 billion.
Quarterly Segment Details
Organic food/snacks volumes grew 1% at the Frito-Lay segment, softer than 1% growth seen in the last quarter. Organic volumes improved 1% at Quaker Foods , another American snacks business, against the decline of 2% recorded in the previous quarter. Organic snacks volumes rose 4% at the Latin America segment (higher than 3.5% in the previous quarter) and 8% in AMENA (softer than 10% growth in the last quarter). Organic snacks volumes rose 3% at the Europe Sub-Saharan Africa ("ESSA") segment, same as the last quarter.
Organic beverage volumes rose 1% in ESSA, down from last quarter growth of 2%. It declined 3% in Latin America, same as last quarter. In AMENA, beverage volumes grew 3%, softer than 5% growth registered in the previous quarter.
Core gross margins contracted 25 basis points (bps) owing to effective revenue management strategies and productivity gains.
Core constant currency operating profit rose 15% despite the negative impact of foreign exchange translation. Core operating margins rose 90 bps on increased gross margin gains.
Cash and cash equivalents were $9,158 million as of Dec 31, 2016, up from $9,096 million as on Dec 26, 2015. Long-term debt was $30,053 million at the quarter-end, up from $29,213 million as on Dec 26, 2015.
Net cash from operating activities were $10,404 million in 2016, down from $10,580 million a year ago.
Core earnings are expected to increase to $5.09 per share, lower than the Zacks Consensus Estimate of $5.16. However, this implies 4.9% year-over-year growth.
Excluding headwinds from currency and structural changes, organic revenues are expected to rise 3%. Currency is projected to hurt revenues by 3%, while the 53rd week in 2016 is expected to hurt sales by 1%.
Also, management plans to return $6.5 billion to shareholders through dividends and share repurchases. Free cash flow is estimated at around $7 billion.
Pepsico, Inc. Price, Consensus and EPS Surprise
Dr Pepper Snapple Group Inc. DPS reported fourth-quarter 2016 results wherein earnings missed the Zacks Consensus Estimate and revenues met the mark. Fourth-quarter adjusted EPS of $1.04 missed the Zacks Consensus Estimate of $1.06 by 1.9%.
Upcoming Peer Release
Monster Beverage Corp. MNST is expected to report its quarterly results on Feb 23.
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