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PepsiCo Inc.’s PEP global snacks and food business, which has been resilient due to the pandemic-led shift to at-home consumption trends, is likely to have contributed to strong top-line performance in first-quarter 2021. Also, its beverage business has been witnessing accelerated growth in recent quarters. The company will report first-quarter 2020 results on Apr 15.
Snacks/Food Business Witnesses Positive Trends
PepsiCo has the competitive advantage of selling both snacks and beverages, which are complementary food categories. Resilience in the snacks/food business worked well for the company amid the coronavirus pandemic. The increased at-home consumption trends have been aiding the Frito-Lay and Quaker food businesses with improved household penetration.
Notably, organic volume for snacks/food business improved 3% in the fourth quarter. Also, organic revenues increased 5% at FLNA and 8% at the QFNA segment in the fourth quarter. Organic revenue growth across both FLNA and QFNA businesses was driven by strong category growth and market share gains.
Gains across all major brands — including double-digit growth for Tostitos and Cheetos, high-single-digit growth for Ruffles, and mid-single-digit growth for Doritos and Lays — have been contributing to Frito-Lay’s revenue growth. Further, the acquisition and integration of BFY Brands in 2020 have been aiding the Frito-Lay’s segment.
Meanwhile, the Quaker business benefited from an elevated demand for at-home breakfast and dinner occasions in 2020, resulting in significant market share growth. Continuation of these trends and the company’s efforts to capitalize on the increasing home penetration is likely to get reflected in its first-quarter top and bottom lines.
Beverage Category Momentum Continues
PepsiCo’s first-quarter 2021 performance is likely to have benefited from positive trends in the beverage category, owing to continued innovation and the demand for healthy drinks. Moreover, increased at-home consumption and improved e-commerce service have been key contributors.
Notably, the PBNA segment is expected to have benefited from elevated at-home consumption trends in North America. Strong double-digit revenue growth for brands like bubly and Starbucks, and high-single-digit growth for Gatorade have been driving the top line. Additionally, brands like Mountain Dew, Lipton and Tropicana reported strong growth in 2020.
Moreover, the market share trend for the liquid refreshment beverage category has been robust, with share gains in the total juices and juice drinks, ready-to-drink tea and coffee, and sparkling water categories. Further, the company has been witnessing robust trends in the energy drinks category, with the relaunch of Rockstar with refreshed packaging and graphics.
Other Trends to Aid Q1 Results
PepsiCo has been continually focused on driving greater efficiency and effectiveness, by lowering costs and plowing back these savings to develop scale and core capabilities. In 2019, the company delivered in excess of $1 billion in productivity savings. The Zacks Rank #3 (Hold) company expects to achieve its productivity goals through savings generated from restructuring actions.
PepsiCo, Inc. Price and EPS Surprise
PepsiCo, Inc. price-eps-surprise | PepsiCo, Inc. Quote
The above-mentioned actions are likely to position the company to further simplify, synchronize and automate processes; re-engineer the go-to-market and information systems; simplify the organization; and optimize its manufacturing and supply-chain footprint. Savings from productivity and restructuring plans are expected to have driven the top line and margins in the to-be-reported quarter.
The Zacks Consensus Estimate for the company’s first-quarter 2020 earnings stands at $1.12 per share, suggesting growth of 4.7% from the year-ago quarter’s reported figure. For first-quarter revenues, the consensus mark is pegged at $14.57 billion, suggesting a 5% increase from the prior-year quarter’s reported figure. (Read More: PepsiCo to Report Q1 Earnings: Is a Beat in Store?)
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