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PepsiCo shares fizz higher amid upbeat Q3 results

 

Thursday, October 13, 2022

The news shaping the markets today

The UN General Assembly voted 143-5 with 35 abstentions to condemn Russia’s illegal annexation of four of Ukraine’s regions and demand a reversal. US crude oil futures traded slightly lower this morning.


Japan’s producer prices rose by 9.7% year-over-year in September, versus 9.4% growth in the previous month. Despite this, the JPY/USD pair rose slightly in forex trading this morning.


Chile’s central bank raised its benchmark interest rate by 50bps to 11.25% at its October meeting. However, the CLP/USD forex pair remained under pressure.


New Zealand’s food price inflation remained unchanged at 8.3% in August, lending some support to the NZD/USD forex pair.


Russia’s Federal Government surplus shrank to ₽55 billion during the first nine months of the year, sending the RUB/USD pair slightly lower in forex trading this morning.

 

What’s happening: Shares of PepsiCo rose on Wednesday, after the company reported results for its third quarter.

What happened: PepsiCo topped expectations for the latest quarter and raised its outlook for the year.

However, the beverages giant reported a decline in volumes for one of its major categories in the quarter.

How were the results: The Purchase, a New York-based company reported growth in sales in the three-month period that ended September 3, with both top- and-bottom-line metrics exceeding estimates.

  • Sales grew 8.8% year-over-year to $21.97 billion, exceeding the consensus estimate of $20.81 billion.
  • Core earnings came in at $1.97 per share, up 10.05% from the year-ago period, beating market expectations of $1.84 per share.

Why it matters: PepsiCo has been able to increase the prices of its products with only a small impact on overall demand, as the company dominates the carbonated drinks market along with Coca-Cola. The shift in trend to eating more at home with customers trying to lower their expenses provided some support to the company’s snacks business. PepsiCo’s average prices surged 17% during the quarter.

Net revenues from Frito-Lay North America rose 20% year-over-year during the quarter, while revenues from Quaker Foods North America climbed 15%. PepsiCo Beverages North America’s revenues grew by just 4%.

PepsiCo increased its market share in major product categories in North America, including salty and savoury snacks and sports drinks.

Globally, the company’s snack volumes fell 1.5%, while beverages grew 3% during the quarter.

Gross profits rose 8% from a year ago to $11.7 billion, while profit margins contracted 40 basis points to 53.1%, despite higher prices of products.

Management raised their full-year projection for organic revenue growth to 12%, from the prior forecast of 10%. The company also raised its EPS growth forecast in core constant currency terms, from 8% to 10%.

How shares responded: PepsiCo’s shares gained 4.2% to close at $169.39 on Wednesday following the release of quarterly results. The stock has lost around 2% over the past six months.

What to watch: Traders will keep an eye on rising inflation, which could impact the company’s results in the ongoing quarter. Markets also await quarterly results from rival Coca-Cola, which is scheduled for release on October 25, 2022.

The markets today

The USD/JPY pair will be in focus today ahead of US inflation data

Context: The US dollar surged to a new 24-year high against the Japanese yen on Wednesday.

Details: The greenback recorded gains against the Japanese yen after data showed US producer prices rising more than expected during September.

The producer price index for final demand accelerated by 0.4% in September, above market expectations of 0.2%. This was also the first increase in three months. On a year-over-year basis, US producer prices increased 8.5%, the smallest rate since July last year, but still came in higher than the consensus estimate of 8.4%.

Following the data release, the USD/JPY forex pair climbed as high as 146.89 on Wednesday, reaching its highest level since August 1998. The pair settled higher by 0.63%, notching gains for the fifth session in a row.

The US dollar index, which measures the greenback’s performance versus a basket of major rivals, rose to 113.32 on Wednesday.

Last month, Japanese authorities stepped in to prop up the country’s currency, announcing its first intervention in the currency market since 1998.

What to watch: Traders await the release of data on inflation and initial jobless claims from the US today. The annual inflation rate in the country had eased for a second consecutive month to 8.3% in August and is expected to decline further to 8.2% in September. US initial jobless claims are expected to come in at 215,000 for the latest week, compared to 219,000 in the week ended October 1.

Other Markets: European trading indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.86%, 0.39%, 0.25% and 0.53%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 0.9700 and 0.9704 Positive
AUD/USD – 0.6271 and 0.6275 Positive
WTI Crude Oil – 87.05 and 87.19 Positive
Platinum  – 878.55 and 880.65 Positive
S&P 500 – 3581.93 and 3591.86 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9702, -0.01%) Dow ($29,299, 0.13%) Brent ($92.43, -0.1%)
GBP/USD (1.1087, -0.14%) S&P500 ($3,595, 0.17%) WTI ($87.14, -0.2%)
USD/JPY (146.78, -0.08%) Nasdaq ($10,856, 0.15%) Gold ($1,676, -0.1%)

What else to watch today

Germany’s consumer price inflation, Saudi Arabia’s inflation rate and wholesale price inflation, South Africa’s gold production and mining production, Turkey’s gross foreign exchange reserves, US continuing jobless claims, consumer price index, natural gas stocks change, gasoline stocks, crude oil inventories, and distillate stockpiles, Brazil’s industry confidence indicator, Mexico’s monetary policy meeting minutes, as well as Indonesia’s total car sales.


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