PepsiCo (PEP) Q2 2021 destroy earnings estimates

PepsiCo reported Tuesday that its quarterly sales were up more than 20% year over year as restaurant demand for its beverages returned, causing a blow to profits.

The company also raised its outlook for adjusted earnings per share growth for the full year.

“Many of the things that we did during the pandemic and continued to invest in business are now paying off as mobility has increased and consumers are coming out more,” CFO Hugh Johnston said in the Squawk Box on Tuesday CNBC.

The company’s shares rose more than 2% in morning trading to hit a new all-time high. The stock is up 3% this year and has a market value of $ 211 billion.

Here’s what the company reported for the second fiscal quarter versus Wall Street expectations, based on an analyst survey by Refinitiv:

  • Earnings per share: adjusted $ 1.72 versus expected $ 1.53
  • Revenue: $ 19.22 billion versus $ 17.96 billion expected

Pepsi reported net income of $ 2.36 billion, or $ 1.70 per share, up from $ 1.65 billion or $ 1.18 per share the previous year.

Without items, the company earned $ 1.72 per share, beating the $ 1.53 per share that Refinitiv polled analysts had expected.

Net sales grew 20.5% year over year to $ 19.22 billion, beating expectations of $ 17.96 billion. Organic sales, which exclude the influence of foreign currencies, acquisitions and divestments, rose by 12.8%.

A Burger King menu of hamburgers and Pepsi soft drinks is on a tray in a Burger King fast food restaurant.

Audrey Rudakov | Bloomberg | Getty Images

The company’s North American beverages business recorded organic sales growth of 21%, the highest of any Pepsi division for the quarter. Beverage volumes rose 15% and food service revenues, which include sales to restaurants, stadiums, and universities, doubled for the quarter. In the previous year, the division’s organic sales decreased by 7%.

Frito-Lay North America, which includes brands such as Doritos and Cheetos, posted organic sales growth of 6%. Convenience stores and food service channels helped to increase sales as consumers became more mobile. The segment saw strong sales during the pandemic. A year earlier, it posted organic growth of 6%.

Quaker Foods North America’s business was the only business to experience declining organic sales. Volume was down 21%, which reduced organic sales by 14%. At the same time a year ago, the segment saw organic sales grow 23% as consumers ate more breakfast at home, which boosted demand for maple syrup and oatmeal. Pepsi said the division’s organic sales increased 9% on a two-year basis. Before the pandemic, it was the weakest part of Pepsi’s business.

Executives said on the quarterly conference call that, like most food and beverage companies, they are currently seeing higher costs for ingredients, freight and labor. Johnston said the company usually hikes prices after Labor Day, adding that the pattern is likely to continue this year.

“We are working with our retail and out-of-home partners to make the right pricing decisions to help consumers improve our margins,” said CEO Ramon Laguarta.

After such a strong quarter, the company now expects currency-neutral earnings per share to grow 11% from its previous forecast of high-single-digit growth. The forecast implies core earnings per share of $ 6.20 for 2021. Analysts were expecting earnings growth of 7.2% for the full year.

Pepsi also cut its forecast for organic sales growth in 2021 from a mid-single-digit figure to 6%. Johnston told CNBC’s Becky Quick that the company tends to make more conservative projections, which could allow it to beat expectations in the second half of the year.

The company also said it is expanding the duration and scope of its five-year productivity program. The company now expects annual savings of at least $ 1 billion through 2026.

“Of course, we cut costs in certain places and then invest in certain areas, such as digitizing the supply chain and more efficient interaction with customers and consumers than in the past,” Johnston told analysts.

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