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PepsiCo’s Stock Price and Valuation Rose after 3Q15 Results

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Stock price movement

PepsiCo (PEP) announced its 3Q15 results on October 6, 2015, before the opening of financial markets. PepsiCo’s stock price appreciated by 1.3% on October 6, as the company had surpassed consensus Wall Street analyst earnings and revenue estimates. As of October 7, the company’s stock price was $98.52, up 4.3% since the start of 2015.

As of October 7, 2015, Coca-Cola’s (KO) stock price has fallen by 1.5% since the start of this year, while Dr Pepper Snapple’s (DPS) stock price has appreciated by 16.1%. The S&P 500 Index has fallen by 3% since the beginning of this year.

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Relative valuation

On October 7, 2015, PepsiCo was trading at a forward PE (or price-to-earnings) multiple of 21.1x. PepsiCo’s valuation has risen by 8.5% since the beginning of 2015 and by 2.2% since the announcement of the company’s 3Q15 results on October 6. We discussed PepsiCo’s earnings and revenue performance in 3Q15 in Parts One and Two of this series.

PepsiCo makes up 4.8% of the portfolio holdings of the Consumer Staples Select Sector SPDR ETF (XLP) and 0.7% of the iShares Russell 3000 ETF (IWV).

On October 7, nonalcoholic beverage companies Coca-Cola, Dr Pepper Snapple, and Keurig Green Mountain (GMCR) were trading at forward PE multiples of 20.3x, 19.9x, and 16.4x, respectively. The S&P 500 Consumer Staples Index and S&P 500 Index were trading at forward PE multiples of 19.3x and 16x, respectively.

PepsiCo has upgraded its expectation for fiscal 2015 core constant currency earnings per share (or EPS) growth to 9% from the previous guidance of 8%. The company’s core EPS in fiscal 2014 was $4.63.

PepsiCo continues to expect mid–single-digit organic revenue growth in fiscal 2015. The company expects currency headwinds to negatively impact net revenue growth and core EPS growth by ten percentage points and 11 percentage points, respectively.

PepsiCo is focusing on productivity initiatives to improve its bottom line. We discussed some of these initiatives in Part Seven of this series. The company is also focused on innovation to drive its sales.

For more updates and earnings analysis, visit Market Realist’s Nonalcoholic Beverages page.

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