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PepsiCo stock makes big moves after FQ2 print

 

Friday, July 14, 2023

Today’s headlines

What’s happening: Shares of PepsiCo rose sharply on Thursday, after the company released results for its fiscal second quarter.

What happened: The beverage and snack maker reported upbeat quarterly results on price increases.

PepsiCo also lifted its full-year profit and sales estimates for the second time this year.

How were the results: The Purchase, New York-based company reported low double-digit growth in sales and earnings for the three months ended June 17.

  • Sales grew by 10.4% year-over-year to $22.32 billion, beating the consensus estimates of $21.73 billion.
  • Adjusted earnings rose 12.4% to $2.09 per share, topping Wall Street expectations of $1.96 per share.

Why it matters: PepsiCo has been increasing prices of its beverages and snacks over the past couple of years due to soaring costs ranging from raw materials to transportation.

Average prices increased 15% during the latest quarter, while organic volumes declined 2.5%. Higher prices provided a boost to the company’s margins and earnings. Operating margins expanded by 610 basis points to 16.4%, while operating income jumped 76% to $3.7 billion.

The company’s net revenues from Frito-Lay North America grew by 14% year-over-year to $5.9 billion, while Quaker Foods North America and PepsiCo Beverages North America rose 1% and 10%, respectively.

Sales in Latin America surged 18% year-over-year and Europe sales grew 13% during the fiscal second quarter.

Management raised the organic revenue growth guidance for fiscal 2023 to 10%, from their earlier forecast of 8%. The company also raised its core earnings estimates from $7.27 per share to $7.47 per share.

How shares responded: PepsiCo’s shares gained 2.4% to close at $187.53 on Thursday, following the release of quarterly results. The stock has added around 7% over the past six months.

What to watch: Investors will watch overall inflation, as further price increase could continue to impact the company’s volumes ahead. Markets will also monitor new product launches, after CFO Hugh Johnston said in an interview with Yahoo Finance Live that the company plans on “expanding the portfolio into permissible snacking and more center-of-the-plate food products.”

The markets today

European stocks will be in focus today ahead of the bloc’s balance of trade report

Context: European equity markets settled higher on Thursday as investors digested recent economic data.

Details: European markets extended gains from Wednesday’s session as global investors assessed the easing of US consumer price inflation in June.

Data released on Thursday showed US producer prices rising by only 0.1% month-over-month in June, lower than market estimates of 0.2%.

Eurozone reported growth in industrial production of 0.2% in May, which marked a slowdown from the 1.0% growth a month ago.

The UK’s economy shrank by 0.1% month-over-month in May, lower than market expectations of a 0.3% contraction. The country’s trade deficit widened to £6.58 billion in May, as exports fell by 2.6% and imports grew by 3.1%. Industrial production also declined 0.6% in May.

Although the data released by the Eurozone and UK raised concerns around these economies, it eased speculations of rate hikes by their respective central banks and lent support to stocks.

The STOXX Europe 600 Index gained 0.61% to close at 461.36 on Thursday, with tech stocks leading the rally. Most sectors closed Thursday’s session in the positive zone. The FTSE 100 added 0.32% to settle at 7,440.21, recording gains for the fourth straight session.

France’s annual inflation rate came in at 4.5% in June, down from 5.1% a month ago. The CAC 40 index rose by 0.5% to close at 7,369.80, notching its highest level in more than a week and recording gains for the fifth session in a row. Germany’s DAX 40 rose 0.74% to settle at 16,141.03 on Thursday.

What are expectations: Investors await the release of the Eurozone’s balance of trade data today. The Eurozone, which reported a trade deficit of €11.7 billion in April, is expected to record a narrower deficit of €9.4 billion in May.

Other Markets: US trading indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.14%, 0.85% and 1.73%, respectively.

The news shaping the markets

The Pentagon said the Wagner forces were no longer involved in Ukraine’s military operations in any significant way. The news sent the safe-haven US dollar index slightly lower this morning.


Indonesia’s retail sales fell by 4.5% year-over-year in May, following 1.5% growth in the prior month, exerting pressure on the IDR/USD forex pair.


Singapore’s GDP expanded by 0.7% year-over-year in the second quarter, higher than market expectations of 0.6% growth, which sent the SGD/USD pair higher in forex trading this morning.


India’s total passenger vehicle sales rose by 18.7% year-over-year to 327,487 units in June. This being significantly higher than the 14.9% growth posted in the prior month lent support to the INR/USD forex pair.


Argentina’s monthly inflation rate slowed to 6% in June, from 7.8% in the earlier month, sending the ARS/USD pair slightly lower in forex trading this morning.

What else to watch today

Germany’s wholesale prices, India’s wholesale prices, value of deposits, foreign exchange reserves, balance of trade, total vehicle sales and value of loans, Italy’s balance of trade, Brazil’s retail sales, Canada’s manufacturing sales, US import prices, export prices, University of Michigan consumer sentiment, and Baker Hughes crude oil rigs, Turkey’s total motor vehicles production, as well as Spain’s consumer confidence indicator.


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