Here’s What Drove PepsiCo’s Earnings in Fiscal 3Q17
Fiscal 3Q17 results
PepsiCo (PEP) announced its fiscal 3Q17 results on October 4, 2017, beating analysts’ earnings expectations but missing their revenue estimates. The quarter ended on September 9, 2017. The snack food and beverage maker delivered adjusted EPS (earnings per share) of $1.48, exceeding the consensus analyst estimate of $1.43. That marks the seventh consecutive quarter that PEP has exceeded analysts’ earnings expectations.
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In fiscal 3Q17, PepsiCo’s adjusted EPS rose 5.7% on a year-over-year basis. That growth rate was lower than 6.7% growth in fiscal 2Q17 but higher than 3.7% in fiscal 3Q16.
Adjusted EPS growth in fiscal 3Q17 was driven by improved operating margins and a lower effective tax rate of 22.2% compared to 23.3% in fiscal 3Q16. The lower tax rate was a result of the favorable impact of an accounting change for certain aspects of share-based payments to employees.
Currency headwinds had a one percentage point adverse impact on the company’s fiscal 3Q17 EPS growth.
Following the strong growth in year-to-date earnings, PepsiCo now expects its fiscal 2017 adjusted EPS to be $5.23 compared to the previous expectation of $5.13. Improvement in the EPS outlook is due to a lower-than-expected impact of currency headwinds. The company now expects currency fluctuations to negatively impact EPS for fiscal 2017 by one percentage point compared to the previous estimate of two percentage points.
Let’s look next at PepsiCo’s revenue.