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PepsiCo Jumps on 3rd-Quarter Earnings Beat

Shares of PepsiCo Inc. (NASDAQ:PEP) jumped 3.32% to $138.39 in pre-market trading on Thursday following the release of third-quarter financial results.

GAAP earnings declined 14.9% from the prior-year quarter to $1.49 per share, but beat analysts' expectations by 5 cents.

PepsiCo recorded 4.2% year-over-year growth in revenue to $17.19 billion, topping projections by $260 million. Excluding the impact of currency fluctuations, organic revenue grew 4.3%.


By segment, Frito-Lay North America sales rose 5.5% to $4.11 billion, Quaker Foods North America revenue increased 1.6% to $576 million and Latin America sales grew 1.93% to $1.9 billion. Further, the PepsiCo Beverages North America segment saw revenue increase 3.4% to $5.64 billion, Europe Sub-Saharan Africa sales grew 5.9% to $3.35 billion and Asia, Middle East and North Africa revenue gained 4.6% to $1.61 billion.

The Purchase, New York-based manufacturer of soft drinks and snacks also noted a 90-basis-point increase in the gross profit margin to 55.24% of net revenue, but a 64-basis-point decline in the operating profit margin to 16.61%.

For full fiscal 2019, PepsiCo expects organic revenue to grow 4% or more, core earnings of $5.50 per share and a tax rate of approximately 21%. The company reaffirmed its expectations for net capital expenditures of $4.5 billion, operating cash flow of $9 billion and free cash flow of $5 billion.

The balance sheet had roughly $5.91 billion in cash on hand, restricted cash and short-term securities, about $3.67 billion in total inventories and $32.55 billion in total debt obligations as of Sept. 7. The equity was worth $14.22 billion.

PepsiCo's stock has climbed 21.23% so far this year. On Wednesday, shares closed at $133.94 for a market capitalization of $187.27 billion. The share price is above the 70- and 120-day simple moving average lines, but it is still below the 30-day line.

The 52-week range is $104.53 to $139.18.

Currently, PepsiCo pays a quarterly dividend of 95.5 cents per common share. The most recent payment was issued on Sept. 30. The distribution generates a forward dividend yield of 2.78% compared to the industry median of 2.55% and versus the S&P 500's yield of 1.94% as of Oct. 2.

Analysts issued an overweight recommendation rating for shares of PepsiCo with an average target price of $135.16.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.