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PepsiCo (PEP) Surpasses Q1 Earnings & Revenue Estimates

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PepsiCo, Inc. PEP reported first-quarter 2021 results, wherein earnings and revenues beat the Zacks Consensus Estimate and improved year over year. The company's results reflected favorable year over year comparisons as well as the overcoming of headwinds related to uneven recoveries across many international markets and weather-related disturbances in the United States. The company also gained from resilience and strength in its global snacks and foods business as well as growth in the beverage category.

PepsiCo also gained from its strong portfolio of brands, a responsive supply chain and flexible go-to-market systems, which helped maintain continued supplies amid the coronavirus pandemic.

Shares of this Zacks Rank #3 (Hold) company grew 0.5% in the past three months compared with the industry’s 2.4% growth.

Quarter in Detail

PepsiCo’s first-quarter core earnings per share (EPS) of $1.21 beat the Zacks Consensus Estimate of $1.12 and increased 13.1% year over year. In constant currency, core earnings were up 14% from the year-ago period. The company’s reported EPS of $1.24 improved 29% year over year.

Net revenues of $14,820 million improved 6.8% year over year and surpassed the Zacks Consensus Estimate of $14,592 million. On an organic basis, revenues grew 2.4% year over year. Foreign currency impacted revenues by 0.5% in the first quarter. Revenues benefited from the continued momentum in the snacking category as well as gains in the beverage business.

PepsiCo, Inc. Price, Consensus and EPS Surprise

PepsiCo, Inc. Price, Consensus and EPS Surprise
PepsiCo, Inc. Price, Consensus and EPS Surprise

PepsiCo, Inc. price-consensus-eps-surprise-chart | PepsiCo, Inc. Quote

Revenues also reflected gains from volume growth and robust pricing in the quarter. Notably, unit volume improved 1% for the snacks/food business and 2% for the beverage business. However, organic volume declined 1%. Moreover, net pricing was up 4% in the first quarter, driven by pricing gains across almost all segments, except for Europe, and Africa, Middle East and South Asia (AMESA).

On a consolidated basis, reported gross margin contracted 88 basis points (bps), while core gross margin declined 139 bps. Reported operating margin rose 174 bps, while core operating margin was down 2 bps.

Segment Details

On a segmental basis, the company witnessed revenue growth across all segments, except for Latin America and Europe. Meanwhile, organic revenues also ascended for all segments, except for AMESA.

Reported revenues improved 4% in FLNA, 2% in QFNA, 5% in PBNA, 40% in AMESA and 70% in APAC segments, whereas the metric declined 5% in Latin America and 2% in Europe. Organic revenues increased 3% each at the FLNA and Latin America segments, while the same was up 2% for PBNA, 1% QFNA and 18% for APAC segments. Further, organic revenues declined 1% for AMESA and were flat for Europe.

Operating profit (on a reported basis) grew 3% for FLNA, 23% for PBNA, 47% for APAC and 4% for AMESA. However, it declined 6% for Latin America and 10% for Europe segments, while the same was flat QFNA.

Financials

The company ended the first quarter with cash and cash equivalents of $5,661 million, long-term debt of $38,991 million, and shareholders’ equity (excluding non-controlling interest) of $13,947 million.

Net cash used in operating activities was $719 million as of Mar 20, 2021, compared with $749 million used as of Mar 21, 2020.

Outlook

The company provided guidance for 2021. It expects organic revenue growth in mid-single digits, with core constant currency EPS growth in high-single digits.

It expects core effective tax rate of 21%. Additionally, the company expects currency tailwinds to aid its revenues and core EPS by 1 percentage point in 2021 based on the current rates.

Further, it remains committed to rewarding its shareholders through dividends and share buybacks. The company anticipates total cash returns to shareholders of $5.9 million, including $5.8 million of cash dividends and $106 million of share repurchases. The company has completed its share-repurchase authorization and expects no more share repurchase through the rest of 2021.

Don’t Miss These Better-Ranked Stocks

Franchise Group, Inc. FRG, with a long-term earnings growth rate of nearly 15%, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Estee Lauder Companies Inc. EL has an expected long-term earnings growth rate of 10.7%. It presently carries a Zacks Rank of 2 (Buy).

The J. M. Smucker Company SJM, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 1.7%.

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