What Drove PepsiCo’s 2Q17 Earnings?
Earnings surpass expectations
Snack food and beverage giant PepsiCo (PEP) surpassed analysts’ revenue and earnings expectations for fiscal 2Q17, which ended on June 17, 2017. The company delivered adjusted EPS (earnings per share) of $1.44 in fiscal 2Q17, exceeding the consensus analyst estimate of $1.40. Fiscal 2Q17 marked the sixth consecutive quarter in which PepsiCo beat analysts’ earnings expectations.
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What drove 2Q earnings?
PepsiCo’s adjusted EPS rose 6.7% on a year-over-year basis in fiscal 2Q17 to $1.44. This growth was driven by higher revenue. We’ll discuss the company’s revenue in part two of this series. PepsiCo’s fiscal 2Q17 bottom line was also positively impacted by a lower adjusted effective tax rate of 23.5% compared to 26.0% in fiscal 2Q16. The lower tax rate reflected favorable resolution of certain international tax matters and an income mix shift.
PepsiCo’s adjusted EPS growth in fiscal 2Q17 is an improvement compared to the 5.6% growth in fiscal 1Q17 adjusted EPS and the 2.3% growth in fiscal 2Q16 adjusted EPS. The company’s fiscal 2Q17 adjusted EPS excludes the impact of a $0.06 gain related to the sale of the company’s minority stake in Britvic.
Rival Coca-Cola (KO) is expected to announce its fiscal 2Q17 results on July 27. Currently, analysts expect Coca-Cola’s adjusted EPS to fall 3.3% to $0.58 in fiscal 2Q17.
PepsiCo expects its fiscal 2017 adjusted EPS to come in at $5.13 compared to its previous EPS guidance of $5.09. This EPS guidance includes the Britvic gain. PepsiCo delivered adjusted EPS of $4.85 in fiscal 2016. The company expects currency fluctuations to have a two percentage point negative impact on fiscal 2017 adjusted EPS growth. The company had earlier forecasted a three percentage point currency headwind impact on adjusted EPS growth.
We’ll discuss PepsiCo’s fiscal 2Q17 revenue in the next part of this series.