02 October 2020

PepsiCo Shares Move Higher on Refreshing Q3 Results

Tags

News shaping
the markets today

     

What’s happening: Shares of PepsiCo edged higher on Thursday after the drinks and snacks giant reported better-than-expected results for its third quarter.

What happened: With more people working and learning from home amid the pandemic, there has been a surge in the demand for snacks.

Despite witnessing a plunge in sales at restaurants since the arrival of covid-19, PepsiCo managed to top expectations and projected a bullish outlook for the year.

How were the results: The American multinational company reported growth in sales and earnings for the third quarter, with both metrices exceeded estimates.

  • Revenues grew to $18.091 billion, from $17.188 billion in the same quarter last year, surpassing the consensus view of $17.226 billion.
  • Net income came in at $2.291 billion, or $1.65 per share, up from $2.100 billion, or $1.49 per share, in the year-ago quarter.
  • Adjusted earnings stood at $1.66 per share, beating the consensus estimate of $1.49 per share.

Why it matters: PepsiCo saw a strong recovery in soda sales with rising demand for Starbucks branded iced coffee pushing beverage sales 6% higher in the quarter. Sales of low-calorie editions of its drinks, including Gatorade and Mountain Dew, also grew. The company holds a market share of around 32% share in the soft drinks industry in the US.

Higher at-home consumption for salty snacks drove demand for company’s Cheetos, Tostitos, and Doritos amid the pandemic.

Sales of snacks under its Frito Lay division gained 7% last quarter, while strong demand for breakfast foods resulted in a 6% increase in sales at Quaker Foods.

“At home consumption trends have remained strong despite the measured reopening of economies and activities in certain areas,” CEO Ramon Laguarta said.

Management projected full year core earnings of $5.50 per share, higher than the market expectations of $5.36 per share. The company also projects full-year organic revenue growth of around 4%.

How shares responded: PepsiCo’s shares gained 1.6% to close at $140.80 on Thursday following the release of strong quarterly results. The stock has climbed more than 6% over the past three months.

What to watch: Investors expect the company’s results to improve further as restaurants gradually reopen. Despite the pandemic, PepsiCo has remained committed to returning cash to shareholders, and markets look toward the next dividend announcement.

The Markets Today

     

US stocks will be in focus today, ahead of the all-important jobs report.

Context: US stocks settled with modest gains in the previous session, as investors continued to focus on progress in the next fiscal stimulus package.

Details: Hopes of another round of stimulus have driven Wall Street stocks this week despite failed talks on Wednesday.

A number of economic releases supported investor sentiment. The US Labor Department reported a decline in initial jobless claims to 837,000 in the week ending September 26, versus a revised 873,000 in the earlier week. The figure came in better than the market expectations of 840,000 and sets a positive backdrop for the market-moving NFP report scheduled for release today.

Consumer spending also improved by 1% in August, Although the ISM manufacturing index fell to 54.6 in September from to a 21-month high of 56 in the earlier month, the latest reading showed expansion for the fifth straight month.

The Dow Jones gained 35.2 points to close at 27,816.90 on Thursday, after rising as high as 28,041.46 earlier in the day. The S&P 500 rose 0.5% to 3,380.8, while the Nasdaq 100 climbed 159 points to settle at 11,326.51.

What to watch: Investors await a basket of economic reports from the US, including employment data, factory orders and consumer sentiment index. The US economy is expected to add 850,000 jobs in September versus a gain of 1.371 million jobs in August. The unemployment rate is expected to decline to 8.2% in September, from 8.4% in August.

Factory orders and consumer sentiment are also expected to highlight further growth in the world’s largest economy.

Despite the House of Representatives approving a $2.2 trillion covid-19 relief package on Thursday, no bipartisan agreement is expected to be reached. Markets will continue to monitor developments related to the stimulus.

Other Markets: European indices closed mixed on Thursday, with the FTSE 100 and French 40 up 0.23% and 0.43%, respectively, while the German DAX 30 closed lower by 0.23%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Eurozone’s consumer prices and European Council special meeting, Brazil's industrial production, Mexico’s foreign exchange reserves, Argentina’s tax revenue as well as the US Baker Hughes crude oil rigs.

 

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.