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PepsiCo (PEP) Q4 Earnings: What's in Store for the Stock?

Food/beverage giant PepsiCo, Inc.PEP is slated to announce fourth-quarter fiscal 2016 results (ending Dec 31, 2016) on Feb 15, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 6.06%. The company has also clocked positive earnings surprises in the past four quarters, at an average of 5.35%.

Let's see how things are shaping up for this announcement.

Factors to Consider

PepsiCo has been doing well on the back of significant innovation, continued momentum in Frito-Lay business, revenue management strategies, improved productivity and better market execution.

Not only has the company been able to beat expectations in the last three quarters, its adjusted EPS (earnings per share) grew 7.2%, 2.3% and 3.7% in the first, second and third quarter, respectively, on margin expansion.

That said, weak soda volumes in developed markets such as the U.S. have become a pressing concern for PepsiCo and for other nonalcoholic beverage companies like The Coca-Cola Company KO and Dr Pepper Snapple Group, Inc. DPS .

Health-conscious consumers are shifting from soda beverages to still or noncarbonated beverages. PepsiCo's CSD volumes declined 3% in the first nine months of 2016. To counter the fall in soda beverage volumes, the company is focusing more on healthier beverage options. The company is also making strategic acquisitions to grow its noncarbonated beverage portfolio. In Nov 2016, the company signed a deal to acquire KeVita, a North American maker of fermented probiotic and kombucha beverages.

Again, as highlighted during the fiscal third-quarter earnings call, foreign exchange headwind will slightly impact the company's results in the fourth quarter.

For the fiscal fourth quarter, the Zacks Consensus Estimate for earnings stands at $1.16, reflecting a 9.4% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $19.60 billion, implying a 5.5% decline.

Earnings Whispers

Our proven model does not conclusively show that PepsiCo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for PepsiCo is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.16. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: PepsiCo carries a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

You can see the complete list of today's Zacks #1 Rank stocks here .

Pepsico, Inc. Price and EPS Surprise

Pepsico, Inc. Price and EPS Surprise | Pepsico, Inc. Quote

Peer Release

The Coca-Cola Company reported better-than-expected results for the fourth quarter of 2016 . Meanwhile, though the cola giant's earnings and revenues beat the Zacks Consensus Estimate, both have declined year over year due to macroeconomic challenges in many international markets and currency headwinds.

Upcoming Peer Releases

Dr Pepper Snapple Group, Inc. is set to report its quarterly results on Feb 14, before the market opens.

Monster Beverage Corp. MNST is expected to report its quarterly results on Feb 23.

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Coca-Cola Company (The) (KO): Free Stock Analysis Report

Dr Pepper Snapple Group, Inc (DPS): Free Stock Analysis Report

Pepsico, Inc. (PEP): Free Stock Analysis Report

Monster Beverage Corporation (MNST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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