PepsiCo (PEP) gave investors a good number of things to digest on its earnings day Thursday. Another solid quarter of demand for many of its food and beverages around the world, but a mixed outlook that may be below some aggressive targets held by the Wall Street community.
Total revenue: $20.6 billion vs. estimates for $20.25 billion
Operating income: $2.7 billion vs. estimates for $2.73 billion
Diluted EPS: $1.45 vs. estimates for $1.44
Organic sales growth: +4.3% vs. estimates for increase of 3.7%
Core EPS guidance 2020: $5.88 vs. estimates for $5.95
Other: Company announced a 7% dividend increase
The beverage and snacks giant notched organic volume gains across all segments except for Latin America. Core operating profits — which excludes the impact of currency fluctuations and is a measure watched closely by analysts — fell in four out of seven segments. The language in PepsiCo’s earnings release suggests profits were held back by “certain operating cost increases” that perhaps offset strong work by executives to cut costs. PepsiCo also invested more aggressively in advertising, specifically in the North America beverage business to combat Coke’s strength in Diet Coke.
PepsiCo shares rose slightly in pre-market trading.
All in, a decent quarter for PepsiCo. What remains to be seen is how investors will balance that with a mixed outlook. PepsiCo guided to 2020 organic sales growth of 4%, below a long-running annual target of 4% to 4.5%. Core EPS guidance of $5.88 was short of some sell-side estimates. PepsiCo management does have a history of guiding conservatively, however, another factor investors must weigh right now.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.