Here's Why PepsiCo (PEP) Looks Poised for Earnings Beat in Q4
PepsiCo, Inc. PEP is expected to register bottom and top-line growth when it reports fourth-quarter 2022 numbers on Feb 9, before the opening bell. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $26.85 billion, implying 6.3% growth from the year-ago quarter's reported figure.
For quarterly earnings, the Zacks Consensus Estimate is pegged at $1.64, suggesting 7.2% growth from the $1.53 reported in the prior-year quarter. The consensus mark has been unchanged in the past 30 days.
We expect the company’s fourth-quarter total revenues to increase 1.4% year over year to $26,347.5 million and adjusted earnings per share to improve 5.2% year over year to $1.61. For 2022, we estimate year-over-year revenue growth of 5.6% to $84,743.5 million, with year-over-year earnings growth of 7.5% to $6.73 per share.
In the last reported quarter, the company reported an earnings beat of 6.5%. It has delivered an earnings surprise of 4.5%, on average, in the trailing four quarters.
PepsiCo, Inc. Price and EPS Surprise
PepsiCo, Inc. price-eps-surprise | PepsiCo, Inc. Quote
Key Factors to Note
PepsiCo looks well-poised for growth in the fourth quarter of 2022, driven by the resilience and strength of global beverage and convenient food businesses. The company is likely to have benefited from delivering convenience, variety and value proposition to customers through its brands.
The company’s fourth-quarter results are expected to reflect gains from improved pricing across all segments. The bottom line is likely to reflect the continued benefits of the mitigation of inflationary pressures through cost-management and revenue-management initiatives. PepsiCo is likely to have benefited from investments in brands, go-to-market systems, supply chains, manufacturing capacity and digital capabilities to build competitive advantages.
Market share growth in the liquid refreshment beverage category, with share gains in the carbonated soft drinks, Ready-to-Drink Tea and water categories, is likely to have aided the improvement in the beverage category. Investments in innovation, pricing and execution also bode well.
The company’s food business has been gaining from revenue growth across core brands like Doritos, Lay’s, Ruffles, Tostitos and Cheetos. The Quaker business has been benefiting from market share gains in the rice and pasta, lite snacks, ready-to-eat cereal, and snack bar categories, as it has been capitalizing on the elevated demand for tasty products that deliver convenience and value.
However, PepsiCo is expected to have witnessed margin pressures in the fourth quarter, driven by the impacts of supply-chain disruptions and inflationary labor, transportation, and commodity costs. In the last reported quarter, PEP anticipated incremental input cost inflation for the balance of 2022. This indicates continued cost inflation effects in the fourth quarter. Adverse currency rates are also likely to have been headwinds.
Zacks Model
Our proven model conclusively predicts 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 chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
PepsiCo has a Zacks Rank #3 and an Earnings ESP of +0.05%.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat:
Coca-Cola KO currently has an Earnings ESP of +2.98% and a Zacks Rank of 2. The company is likely to register top-line growth when it reports fourth-quarter 2022 results, while the bottom line is likely to be flat year over year. The consensus mark for KO’s quarterly revenues is pegged at $9.98 billion, which suggests 5.4% growth from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The consensus mark for Coca-Cola’s quarterly earnings has moved down 4.3% in the past 30 days to 45 cents per share. The consensus estimate for KO’s fourth-quarter earnings is expected to be flat with the year-ago quarter’s reported figure. KO has delivered an earnings beat of 8.8%, on average, in the trailing four quarters.
The Boston Beer Company SAM currently has an Earnings ESP of +13.39% and a Zacks Rank of 3. The company is likely to register increases in the top and bottom lines when it reports fourth-quarter 2022 results. The Zacks Consensus Estimate for quarterly earnings has been unchanged in the past 30 days at 64 cents per share. The consensus estimate indicates growth of 811.1% from the year-ago quarter's loss per share of 9 cents.
Boston Beer’s top line is expected to have risen year over year. The Zacks Consensus Estimate for SAM’s quarterly revenues is pegged at $403.2 million, suggesting growth of 15.8% from the figure reported in the prior-year quarter. SAM has delivered a negative earnings surprise of 52.1%, on average, in the trailing four quarters.
Kellogg's K currently has an Earnings ESP of +4.12% and a Zacks Rank of 3. The company is likely to register an increase in the top and bottom lines when it reports fourth-quarter 2022 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $3.7 billion, which suggests a rise of 7% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Kellogg’s quarterly earnings has been unchanged at 84 cents per share in the past 30 days. The consensus mark for K suggests 1.2% growth from the year-ago quarter’s reported number. K has delivered an earnings beat of 10.6%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CocaCola Company (The) (KO) : Free Stock Analysis Report
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
Kellogg Company (K) : Free Stock Analysis Report
The Boston Beer Company, Inc. (SAM) : Free Stock Analysis Report
