What to look for when PepsiCo (PEP) reports Q4 results next week

It is estimated that the market for non-alcoholic beverages would grow at a steady pace in the coming years. PepsiCo, Inc.  (NASDAQ: PEP), a market-leading food and beverages company, has remained largely unaffected by the market headwinds, thanks to its brand power and customer loyalty.

Over the years, the company created shareholder value consistently and has remained a favorite among investors. The stock hit a record high in December last year, before retreating to the pre-peak levels in the following weeks. Currently, PEP is trading slightly below its 52-week average.  

Outlook

The sales volume is increasing and higher prices are driving margin growth. It shows that the management’s initiatives under the PepsiCo Positive transformation program are paying off. The persistently positive selling environment for packaged snacks and soft drinks has helped the company constantly grow its market share. Hence, it has ample liquidity to make investments and return cash to shareholders. From a long-term perspective, PEP is one of the safest investment options right now.

Strong Earnings

For the September quarter, the company reported broad-based sales growth across all geographical segments, with Latin America and Frito-Lay North America segments registering the strongest year-over-year increase. At $22 billion, third-quarter revenue was up 9%, which translated into a 10% increase in adjusted profit to $1.97 per share. The results topped expectations. Interestingly, quarterly earnings never missed estimates for more than a decade.

PepsiCo, Inc. Q3 2022 Earnings Call Transcript

“With regards to reinvestments, the philosophy we’ve been using in the last few years to continue to balance the short term and long term I think it’s realizing in a good performance. We continue to invest in our brands, you know we’re investing a lot in digitalizing the company and some of the long-term sustainability bets that we’re making as well. So, we continue with that and next quarter will not be different than any of the other quarters in the year,” said PepsiCo’s CEO Ramon Laguarta at the last earnings call.

Q4 Report Due

PepsiCo is preparing to release its fourth-quarter report on February 9, before the opening bell. Analysts are of the view that sales increased by around 6% to $26.8 billion in the final three months of 2022. Adjusted profit is expected to have increased to $1.65 per share from $1.53 per share last year.

On Thursday, shares of PepsiCo traded slightly below $170, after opening the session lower. In the last 30 days, the stock lost about 6%.