PepsiCo, Inc. PEP is set to report second-quarter 2020 results on Jul 13, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 4.9%. Moreover, its bottom line beat the Zacks Consensus Estimate over the trailing four quarters, delivering a surprise of 3.4%, on average.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.25, implying an 18.8% decline from the year-earlier quarter's reported figure. Notably, the consensus mark has been unchanged in the past 30 days. For quarterly revenues, the Zacks Consensus Estimate stands at $15.75 billion, suggesting a 4.3% decline from the prior-year quarter’s reported figure.
Key Factors to Note
PepsiCo has been displaying strength amid the coronavirus pandemic on its strong portfolio of brands, a responsive supply chain and flexible go-to-market systems, which helped maintain continued supplies. Further, robust pricing and volume gains have been aiding its performance.
PepsiCo, Inc. Price and EPS Surprise
PepsiCo, Inc. price-eps-surprise | PepsiCo, Inc. Quote
While the coronavirus outbreak has been wreaking havoc everywhere, PepsiCo has been seeing many opportunities with some risks in the situation. The company has been evaluating various stages of the pandemic and the resulting consumer behavior, and has been adjusting supplies accordingly to serve consumers better. The social distancing and shelter-in-place norms have shifted consumption habits more toward at-home channels, reflecting a marked increase in the e-commerce channel and increased basket size.
To capitalize on the growing digital commerce trends, the company launched two online sites on May 11 for consumers to shop during the coronavirus pandemic and beyond. The sites, namely PantryShop.com and Snacks.com, offer all of PepsiCo’s beverage, snack and food assortments. The sites were developed keeping the current scenario in mind, taking care of the consumers’ new normal of working and exercising at home, and homeschooling. Gains from the launch of these sites are expected to get reflected in the company’s top-line results for the second quarter.
However, on its last earnings call, PepsiCo expected unprecedented uncertainties across geographies, retail channels and consumer behaviors due to the coronavirus outbreak to mar second-quarter results. Moreover, the company has been incurring higher labor, logistics and service costs to meet customer demand, which are likely to have persisted in the second quarter.
Additionally, it predicted organic revenue decline at a low-single-digit rate for the second quarter. However, the company’s recent acquisitions of Pioneer Foods and ROCKSTAR, and the distribution agreement with Bang Energy are expected to have contributed to its performance in the quarter. It also expects the weakness in immediate consumption channels, retail closures and the coronavirus outbreak-related restrictions to have marred operating margin in the quarter. Moreover, the company expects adverse currency impacts of low to mid-single-digit percentage rate on net revenues and core earnings per share in the second quarter.
Our proven model does not conclusively predict an earnings beat for PepsiCo this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
PepsiCo carries a Zacks Rank #4 and an Earnings ESP of -1.09%.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
The Clorox Company CLX has an Earnings ESP of +0.67% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Monster Beverage Corporation MNST presently has an Earnings ESP of +0.52% and a Zacks Rank #3.
Archer Daniels Midland Company ADM currently has an Earnings ESP of +0.51% and a Zacks Rank #3.
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