Will PepsiCo Deliver Strong 1Q17 Earnings?

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Part 3
Will PepsiCo Deliver Strong 1Q17 Earnings? PART 3 OF 5

PepsiCo’s 1Q17 Earnings: What Wall Street Analysts Expect

Earnings trend

PepsiCo (PEP) is slated to announce its fiscal 1Q17 results on April 26. The company exceeded analysts’ earnings expectations in each of the four quarters in fiscal 2016. For fiscal 1Q17, which ended on March 25, 2017, analysts expect PepsiCo to deliver adjusted EPS (earnings per share) of $0.91. This analyst estimate indicates a YoY (year-over-year) growth of 2.2% in the company’s 1Q17 adjusted EPS. Analysts expect the adjusted EPS of Coca-Cola (KO) and Dr Pepper Snapple (DPS) to rise -2.2% and 2.1%, respectively, in 1Q17.

PepsiCo’s 1Q17 Earnings: What Wall Street Analysts Expect

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Earnings in the previous quarter

Despite currency headwinds, PepsiCo’s adjusted EPS rose 13.2% to $1.20 in 4Q16. This double-digit growth resulted from higher revenue and an improved operating margin. PepsiCo’s 4Q16 adjusted EPS excluded one-time items like a $242 million pre-tax pension settlement charge related to the purchase of a group annuity contract and a $233 million pre-tax charge associated with debt redemption.

PepsiCo’s reported and adjusted operating margin expanded by 15 basis points and 90 basis points, respectively, in fiscal 4Q16. This growth resulted from the implementation of effective revenue management strategies and productivity gains. PepsiCo expects to generate annual productivity savings of $1.0 billion in fiscal 2017.

Company guidance

Based on the guidance issued in February 2017, the company expects its fiscal 2017 adjusted EPS to arrive at $5.09 per share. This multiple compares to adjusted EPS of $4.85 in fiscal 2016. The company expects currency headwinds to impact its 2017 EPS by three percentage points.

We’ll look at analysts’ recommendations for PepsiCo’s stock in the next part of this series.


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