PepsiCo Stock $PEP Up as Investors Cheer Stellar Q3 Earnings, Raises View

PepsiCo (PEP) reported solid third-quarter 2022 results on October 12 before markets opened. Both earnings and revenues grew year over year (YoY) and outperformed analyst recommendations.

Core earnings per share (EPS) for the 12-weeks ended September 3, 2022, came in at $1.97, beating the analyst estimate by 5.8%.

The earnings growth was driven by 8.8% YoY in net revenues, which came in at $21.97 billion, beating the analyst estimate by 4.9%.

As a result, the company’s stock $PEP is up 7.4% since the earnings release, buoyed by upbeat Q3 performance.

Further, the company raised the full-year guidance, backed by the strength of its business momentum, inducing investor confidence in the stock.

The company now expects full-year 2022 organic revenue to increase 12% (previously expected 10%) and core constant currency (cc) EPS to grow 10% (formerly projected 8%).

Earnings season is keenly watched by those interested in stock market investment, as it gives insights into where the company is headed.

Investors closely watch how the management is evolving the company’s business, addressing existing challenges, and executing pre-determined plans.

Meanwhile, stock market enthusiasts find earnings price action trading intriguing.

Here we dive deep to know how PepsiCo performed the latest reported quarter:

Quarter in Detail

North America divisions delivered strong, double-digit organic revenue growth in the third quarter.

Frito-Lay North America delivered 20% organic revenue growth and gained market share in the macro, savoury, and salty categories for the third quarter. The company’s trusted brands, including Doritos, Cheetos, Lay’s, Ruffles, Tostitos, and Fritos, delivered double-digit net revenue growth.

Quaker Foods North America delivered 16% organic revenue growth in the third quarter and gained market share in the rice and pasta, lite snacks, ready-to-eat cereal and hot cereal categories. The launch of Quaker On - TheGo Snack Multipack, Quaker Puffed Granola, and Quaker Oat Flour, remains a positive.

PepsiCo Beverages North America’s organic revenue growth sequentially accelerated in the third quarter to 13% as category growth and consumer demand remained resilient.

Management remains encouraged by the progress in its sports-themed beverage —Gatorade. The company continues to boost its presence in the sports nutrition category with innovations across Gatorade Zero, Propel, Gatorlyte, and GFit – a brand portfolio that fuels performance and athletic wellness.

Organic revenues from “International business” grew 16% YoY, marking its 6th consecutive quarter of double-digit organic revenue growth, despite an increasingly complex geopolitical and macroeconomic environment.

Comparing $PEP v/s $SPX 1 year price performance

Chart Source:TradingView
Date: As of US markets close on October 13

Balance Sheet and Cash Flow

PepsiCo ended third-quarter 2022 with cash and cash equivalents of $6.415 billion and short-term investments of $327 million as of September 3, 2022.

As of September 3, 2022, Long-term debt was $36.14 billion, while Short-term debt obligations were $3.11 billion, and Shareholders’ equity (excluding non-controlling interest) was $18.98 million.

Net cash from operating activities was $6.31 million for 36-week ended September 3, 2022, compared with $6.63 million for 36-week ended September 4, 2021.

PepsiCo returned $5.75 to shareholders for 36-week ended September 3, 2022, comprising cash dividends worth $4.59 billion and share repurchases worth $1.16 billion.

Raised Fiscal 2022 View

PepsiCo anticipates global beverage and convenient foods businesses to remain resilient and perform well for the remaining year.

Moreover, PepsiCo’s Frito-Lay has signed on as a North American sponsor for the 2022 FIFA World Cup, which could significantly boost the fourth-quarter performance.

Management remains elated that demand elasticity trends have remained favourable, despite volatility in the macroeconomic environment.

The company is improving cost and revenue management initiatives as consumers adapt to inflationary pressures.

Buoyed by business resilience, the company now expects to deliver 12% organic revenue growth (previously 10%) and 10% core EPS growth at cc (previously 8%) for the fiscal year 2022.

The guidance above implies 2022 core EPS of approximately $6.73, representing an increase of 7.5% compared to 2021 core EPS of $6.26.

For the fiscal year 2022, PepsiCo aims to return approximately $7.7 billion to shareholders, comprising $6.2 billion in dividends and $1.5 billion in share repurchases.