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What Investors Need to Know About PepsiCo's 4th-Quarter Results

PepsiCo Inc. (NASDAQ:PEP) released its fourth-quarter results before the opening bell on Thursday. Robust performance in the North American beverage and snacks division pushed earnings past analysts' projections. In addition, the company spent more on marketing and advertising, which helped propel the company's revenue higher.

By the numbers

The food and beverage giant recorded adjusted earnings of $1.45 per share on $20.64 billion in revenue. Analysts were anticipating earnings of $1.44 per share on $20.47 billion in revenue.

Stripping out the impact of acquisitions, divestitures and currency, organic sales inched up 4.3% in the reported quarter.

Reflecting on the company's performance, Chairman and CEO Ramon Laguarta said:

"We increased brand support to become more locally relevant and consumer-centric, we strengthened our go-to-market execution to enhance our customer relationships, and we embraced a new set of initiatives to help build a more sustainable food system."

Segment performance

PepsiCo's Frito-Lay North America division recorded 3% sales growth in the fourth quarter, while operating profit advanced 3% and volume surged 2%. Organic sales remained flat at Quaker Foods North America as compared to the year-ago period and rose 3% at PepsiCo North America Beverages. While the former saw its operating profit decline 21%, the latter witnessed a gain of 5%.

PepsiCo posted double-digit operating profit growth in the overseas markets, namely Latin America (16% year over year) and Europe (28%).


In an effort to offset declines in sales of sugary drinks like soda, Pepsi is investing in snacks like Doritos and Lay's potato chips.

The company is spending on advertisement and marketing to boost its organic sales. In addition, PepsiCo will focus more on its e-commerce business this year, which brought in approximately $2 billion in retail sales in 2019.

"We will continue to invest in our business and strive to develop advantaged capabilities that will fortify our business for the long term," Laguarta said.


For 2020, the company expects a 7% increase in core constant currency earnings per share. Adjusted earnings per share are projected to be $5.88, which reflects the impact of foreign currency. PepsiCo anticipates organic sales growth of 4%. The free cash flow guidance is about $6 billion, while operating cash flows are estimated to be approximately $11 billion. Capital spending is estimated to be $5 billion.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.