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Though PepsiCo’s 3Q15 Revenue Beat Estimates, It’s Still Falling

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PepsiCo’s revenue beats estimates

PepsiCo’s (PEP) revenue was $16.3 billion in the third quarter of fiscal 2015 ended September 5, 2015. The company’s 3Q15 revenue was ahead of the Wall Street analyst consensus revenue estimate of $16.1 billion. However, 3Q15 marked the fourth consecutive quarter in which the company’s revenue fell.

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What impacted 3Q15 revenue?

PepsiCo’s revenue in 3Q15 declined by 5.2% from the comparable quarter of the previous year. PepsiCo’s Frito-Lay North America and North America Beverages segments were the only two divisions that registered growth in reported revenue in 3Q15. We’ll discuss the performance of these two key segments in Parts Three and Five of this series.

PepsiCo’s North America business, which comprises its Frito-Lay North America, Quaker Foods North America, and North America Beverages segments, accounted for 60.4% of the company’s net revenue and about two-thirds of the company’s core division operating profit in the first nine months of fiscal 2015.

PepsiCo’s revenue continued to be adversely impacted by currency headwinds in 3Q15. The company’s organic revenue, which excludes the impact of acquisitions, structural changes, and foreign exchange translations, increased by 7.4% in 3Q15.

Currency fluctuations were a major roadblock

PepsiCo and its nearest rival Coca-Cola (KO) have a presence in over 200 countries around the world. This increases their exposure to foreign currency fluctuations. Packaged food firms Kellogg’s (K) and Mondelez (MDLZ), which compete with PepsiCo in certain snack food categories, derived 33.2% and 77.9% of their net revenue, respectively, from outside North America in the first half of fiscal 2015.

In the first nine months of fiscal 2015, PepsiCo’s operations outside of the United States accounted for 44% of its net revenue. The company’s operations in Mexico, Canada, Russia, the United Kingdom, Venezuela, and Brazil generated 22% of its net revenue.

The unstable conditions in some of these countries, such Russia and Venezuela, are expected to continue to adversely impact the company’s top line.

In 3Q15, currency headwinds negatively impacted PepsiCo’s net revenue by 12 percentage points. PepsiCo makes up 2% of the holdings of the iShares Russell Top 200 Growth ETF (IWY) and 1.4% of the SPDR S&P Dividend ETF (SDY).

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