12 February 2021

Pepsi’s Q4 Refreshes Investors After Coke’s Low Sales

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News shaping
the markets today

     

What’s happening: Shares of PepsiCo slipped on Thursday, despite the soda giant exceeding Wall Street expectations for its fourth quarter.

What happened: Pepsi recorded volume growth in both its food and beverages segments, which continued to benefit from buying trends amid the pandemic.

The performance was particularly impressive against Coca-Cola’s disappointing sales. Pepsi also issued bullish guidance for 2021 and announced a 5% dividend hike.

How were the results: Pepsi reported both revenues and earnings ahead of market expectations.

  • Revenues grew 8.8% to $22.46 billion, versus the Street view of $21.78 billion.
  • Adjusted earnings came in at $1.47 per share, higher than the consensus estimate of $1.46 per share.

Why it matters: People continued to consume more beverages and snacks while staying home due to work-from-home trends and the reimposition of restrictions with a renewed surge in covid-19 infections in the fourth quarter.

Pepsi’s North American beverage unit recorded organic sales growth of 5.5%. Sales of Bubly, Gatorade Zero, and the Starbucks-branded coffee drinks drove Pepsi’s top-line. Snacks also contributed meaningfully to the company’s fourth-quarter results. Frito-Lay North America delivered organic revenue growth of 5%, with Tostitos and Cheetos being the top-performing brands. Quaker Foods posted organic revenue growth of 8%.

Pepsi vs Coca-Cola: Investors seeking to gain exposure to the beverage category due to the pandemic-driven consumer trends typically choose between PepsiCo and The Coca-Cola Company. The latest results by these two beverage giants indicate the continued strengthening of Pepsi’s market position.

While Coca-Cola has remained focused on soda sales, Pepsi has worked hard to diversify its portfolio over the years, which now includes health drinks, snacks, and packaged foods. This worked in Pepsi’s favour through 2020, with people shopping for more snacks and packaged foods amid restrictions.

Moreover, Pepsi’s “at-home” positioning drove sales in 2020, while Coca-Cola’s sales were hurt by the “food-away-from-home” image during the pandemic.

How shares responded: Despite all the good news, Pepsi’s shares breached the key support level of $136 and ended Thursday’s session 1.98% lower. The stock has lost 9% year to date.

The Markets Today

     

US stocks will be in focus today, after a highly volatile session on Thursday.

Context: Wall Street closed mixed on Thursday but remains on track to post a weekly gain at record levels.

Details: US stocks had begun the week on a strong note, although the rally seems to be losing momentum.

The US Labor Department reported a decline in initial jobless claims to 793,000 in the week ended February 6, versus the previous week's reading of 812,000. Despite the decline, the figure came in worse than market expectations of 757,000. Although this was the lowest level in four weeks, investors remain concerned about a slowdown in the labour market recovery, given the delay in the US government’s approval of the new stimulus package.

Sentiment was supported to some extent by a decline in continuing jobless claims to 4.545 million in the week ended January 30, from 4.690 million in the prior week.

Investors also became hopeful after US President Joe Biden said on Thursday that his administration had deals in place for an additional 200 million doses of covid-19 vaccines from Pfizer and Moderna. The latest addition brings the total vaccine doses for America to 600 million. Biden reassured that the country would have enough supplies to vaccinate 300 million Americans by end-July.

Meanwhile, Wall Street witnessed price swings on Thursday, driven by Reddit posts.

The Dow Jones index slipped 0.02% to end the session at 31,430.70. The 30 blue-chip index is up around 0.9% so far this week and 4.8% in February. The S&P 500 gained 0.17% to reach 3,916.38 on Thursday, while the Nasdaq climbed 0.38% to 14,025.77. Tech and semiconductor stocks hit record highs on Thursday, energy shares plummeted.

Week to date, the S&P 500 and Nasdaq are up 0.8% and 1.2%, respectively.

What to watch: Investors will keep an eye on the MAGA stocks today, which did not climb even amid the broader rally in tech stocks. Rising covid-19 cases remain a major concern for the markets, with total infections in the US surging past 27 million.

Other Markets: European trading indices closed mostly higher on Thursday, with the Eurozone Stoxx 600, German DAX 30 and FTSE 100 up by 0.46%, 0.77% and 0.07%, respectively, while the French CAC 40 ended the day lower by 0.02%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Czech Republic’s inflation rate, Hungary’s inflation rate, Spain’s inflation rate, Poland’s GDP growth, Russia’s interest rate decision, Italy’s property prices, India’s foreign exchange reserves and manufacturing PMI, Canada’s wholesale sales and industrial product price index, as well as the US consumer sentiment and Baker Hughes oil rig count.

 

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