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What to Expect from PepsiCo’s Fiscal 3Q17 Results

PART:
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Part 2
What to Expect from PepsiCo’s Fiscal 3Q17 Results PART 2 OF 7

Can PepsiCo Deliver Improved Revenue Growth in Fiscal 3Q17?

Revenue trends

PepsiCo (PEP) has delivered revenue growth in the past three quarters after reporting lower revenue for eight straight quarters. In fiscal 2Q17, which ended on June 17, 2017, PepsiCo’s revenue rose 2.0% on a year-over-year basis. This growth rate was an improvement compared to the 1.6% revenue growth in fiscal 1Q17 and the 3.3% decline in revenue in fiscal 2Q16.

Can PepsiCo Deliver Improved Revenue Growth in Fiscal 3Q17?

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Growth drivers in the previous quarter

PepsiCo’s revenue rose 2.0% to $15.7 billion in fiscal 2Q17, exceeding the consensus analysts’ revenue estimate of $15.6 billion. This growth was primarily the result of a 3.0% favorable impact of higher pricing. PepsiCo and its peers have been raising the prices of their products in certain markets to mitigate the impact of weak volumes.

Adverse currency movements continued to negatively impact the company’s revenue. In fiscal 2Q17, foreign currency headwinds had a 1.5 percentage-point adverse impact on the company’s revenue growth. Excluding the impact of currency fluctuations and structural headwinds, PepsiCo’s organic revenue rose 3.1% in fiscal 2Q17.

Revenue expectations

Analysts expect PepsiCo’s fiscal 3Q17 revenue to rise 1.8% on a year-over-year basis to $16.3 billion. Currently, analysts expect Coca-Cola’s (KO) 3Q17 revenue to fall 18.0% to $8.7 billion. Structural headwinds primarily related to the company’s refranchising of bottling operations are expected to impact the company’s 3Q17 revenue.

PepsiCo expects organic revenue growth of at least 3.0% in fiscal 2017. The company expects currency headwinds to adversely impact reported net revenue growth by ~2.0 percentage points. The company expects the 53rd week in fiscal 2016 to negatively impact reported net revenue growth in fiscal 2017 by 1.0 percentage point.

Let’s look at PepsiCo’s North America volumes in the next part of this series.

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