Stock of the week - PepsiCo (13.10.2022)

PepsiCo (PEP.US) raised its outlook for the year on Wednesday as rising prices boosted the conglomerate's third-quarter revenue. The company's shares gained more than 4% after the interim report was announced.

Revenues for the quarter ended September 3 totaled $21.97 billion, an increase of 9% year-on-year, above Wall Street expectations. Interestingly, the company managed to achieve this result despite a decline in sales volumes at some of its units, including its Frito-Lay North America division, thanks to rising inflation.

Despite the decline in volumes, in the third quarter Pepsi's revenues at the Frito-Lay North America division recorded a 20% increase, Quaker Food North America's revenues grew by 15% while PepsiCo Beverages North America's revenues increased by 4%. 

PepsiCo's results are as follows:

Earnings per share (EPS): $1.97 vs. $1.84 expected.

Revenue: $21.97 billion vs. $20.84 billion expected.

The company also decided to raise its forecasts for 2022. In terms of revenue, the projected growth is now 12%, vs. the previous 10%, while regarding net profit the estimate is 10% y/y vs. the previous 8%. 
The conglomerate also decides to expand its energy drink business, acquiring a stake in Celsius Holdings in August for $550 million and launching Gatorade FastTwitch a month later. CFO Hugh Johnston said PepsiCo intends to maintain its portfolio of energy drink brands as the market is highly segmented. For the period ended September 3, PepsiCo's net income was $2.7 billion, up from $2.22 billion a year ago. Total revenue rose to $21.97 billion, up from $20.19 billion a year ago. PepsiCo announced that it expected costs to rise in the second half of the year. To counter this trend, the conglomerate is stepping up the implementation of cost management processes, which include using smaller sizes in its packaging. In the third quarter, the company's gross margin remained unchanged from last year at 53%.

Source: xStation 5