4 Things You Need to Know About PepsiCo's Recent Earnings
PepsiCo reported third-quarter earnings on Wednesday. Here's what you need to know about the results.
PepsiCo's third-quarter organic net revenues grew 3.3%, which was aided by its snacks and dragged down by its beverages. The beverage and snack food giant's profits came in at $1.23 per share, which was roughly flat from a year earlier. Shares were up immediately following the announcement.
Just Tuesday, rival Coca-Cola unveiled relatively flat third-quarter results. Yet, given the same currency headwinds and macroeconomic volatility, PepsiCo weathered through and displayed a decent quarter, attributed mostly to PepsiCo's strength in its snack food sales.
Slowing emerging-market gains
Both PepsiCo and Coca-Cola are pursuing emerging-market growth in order to gain market share for their brands. Yet the slowing rate of emerging market gains is a concern. But in developing and emerging markets, organic revenue grew 9% for the quarter. China and Pakistan performed particularly well for the segment, with both countries displaying double-digit growth in both snacks and beverages. Sales growth also came from large Latin American developing markets. For example, third-quarter organic revenues grew 9% in Brazil. Meanwhile, Latin American consumption was flat for Coca-Cola in the third quarter.
Fizzling soda consumption helped by savory snack growth
Americans are drinking less soda than they did a decade ago. In the midst of this declining domestic soda consumption, PepsiCo's closely watched American beverage segment saw organic net revenues contract 2%. Yet PepsiCo's Frito-Lay North America segment saw organic revenues grow 5% for the third quarter, aided by strong innovation from its Tostitos Cantina, Doritos Jacked Ranch Dipped Hot Wings, Cheetos Mix-Ups, and Lay's Do Us a Flavor brands.
Fate of PepsiCo's beverage business
Activist investor Nelson Peltz recently called for PepsiCo to spin off its beverage business and buy snack-and-candy giant Mondelez International. Peltz, who's accumulated huge positions of both PepsiCo and Mondelez shares, feels PepsiCo's underperforming drinks segment is weighing down its mighty snack-foods business.
Despite challenging soda sales, PepsiCo CEO Indra Nooyi points to the company's productivity improvements to date. By year-end, PepsiCo is on track to deliver $900 million in savings and an overall targeted $3 billion in savings by 2015. Yet Nooyi hasn't dismissed the notion of restructuring its North American beverage business. She's expected to provide an update in early 2014 to address those efforts.
More compelling stocks
Do you love dividend-paying stocks like PepsiCo? Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.
The article 4 Things You Need to Know About PepsiCo's Recent Earnings originally appeared on Fool.com.Fool contributor Nicole Seghetti owns shares of PepsiCo and Mondelez International. You can follow her on Twitter @NicoleSeghetti. The Motley Fool recommends Coca-Cola and PepsiCo. The Motley Fool owns shares of PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.