Tallahassee Journal

PepsiCo stock jumps on upbeat Q4

PepsiCo stock jumps on upbeat Q4

Just one day after Coca-Cola reported an unexpectedly upbeat fourth quarter, rival PepsiCo also reported fourth quarter results that exceeded expectations, thanks, in part, to stronger sales from it’s Frito-Lay division. PepsiCo shares were up more than 2% in afternoon trading, or $2.13 at $100.12. It’s not as if PepsiCo or Coca-Cola are suddenly on a financial roll — but they’re now at least starting to exceed modest expectations of industry analysts.23_pepsico

“I think we are seeing a stabilization of their business,” says Joseph Agnese, equity analyst at S&P Capital IQ, said of PepsiCo. “Improved growth is driven by improvement in their snacks business.” During the fourth quarter, sales at the Frito-Lay North America division, which sells Doritos, Lay’s and Cheetos, rose 3.5%. thanks to stronger volume and higher prices.

But the broader outlook for carbonated beverages isn’t so good, says Agnese, with demand weakening “as consumers seek out healthier alternatives to sugary soft drinks.” PepsiCo said it had profit of 87 cents per share. Earnings, adjusted for pretax expenses and restructuring costs, came to $1.12 per share, which surpassed Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.08 per share. PepsiCo reported core earnings per share of $4.63 for the full year, on organic revenue growth of 5% for the quarter and 4% for the full year. Consensus for the full year was $4.59.

The company posted revenue of $19.95 billion in the period, which also beat forecasts. Analysts expected $19.78 billion, according to Zacks. Net revenue declined 1% in the fourth quarter and was even in the full year, reflecting the impact of foreign exchange translation In a conference call, CEO Indra Nooyi, said the full-year results “met or exceeded” each of the company’s 2014 financial targets. And she called PepsiCo’s product innovation pipeline “perhaps the strongest in our history.”

She said, despite a volatile, global macro environment, the company expects in 2015 “to again deliver results consistent with our long-term future objectives.” And she bragged about 2015 being the 50th anniversary of merger of the Pepsi and Frito-Lay brands. She noted that over five decades of growth, the company grew from $510 million to almost $67 billion today. A $100 investment made in the company in 1965 (with dividends reinvested) would be worth more than $42,000 today, she noted. Those comments seemed to be aimed at activist investor Nelson Peltz, whose Trian Fund has pressured PepsiCo to split its more successful snacks business from its beverages line. Nooyi has rejected that idea. But last month, PepsiCo said that an advisory partner to Trian will join PepsiCo’s board in March. That move is viewed as a truce between the sides.