Can PepsiCo’s 4Q15 Revenue Rise after 4 Straight Down Quarters?



4Q15 results

PepsiCo (PEP) is scheduled to announce its 4Q15 results on February 11, 2016. The company’s fourth quarter ended on December 26, 2015. The consensus Wall Street analysts’ estimate of PepsiCo’s fourth quarter revenue is $18.5 billion. This estimate reflects an expected 7.1% decline in the company’s 4Q15 revenue on a year-over-year basis.

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Past performance

PepsiCo’s revenue has declined for four straight quarters. In 3Q15 ended September 5, 2015, the company reported revenue of $16.3 billion, exceeding the consensus analysts’ revenue estimate of $16.1 billion. However, the company’s 3Q15 revenue declined by 5.2% on a year-over-year basis, due to a 12% unfavorable impact of foreign exchange translation. The company’s Frito-Lay North America and North America Beverages segments were the only two segments that posted positive revenue growth in 3Q15.

The company’s organic revenue, which excludes the impacts of acquisitions, divestitures and other structural changes, and currency movements, grew 7.4% in 3Q15, driven by a 10% growth in the Global Snacks business and a 5% growth in the Global Beverage Business sales. PepsiCo constitutes 4.5% of the Consumer Staples Select Sector SPDR ETF (XLP).

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Comparison with peers

Coca-Cola (KO) reported a 4.6% decline in its 3Q15 revenue primarily due to currency headwinds. Dr Pepper Snapple (DPS) delivered a 3% growth in its 3Q15 revenue, driven by higher concentrate case sales, favorable product and package mix, and higher pricing. Monster Beverage (MNST) reported a 19% growth in its 3Q15 revenue due to strong growth in the Monster Energy brand drinks. The company also benefited due to the additional sales generated from the brands acquired from Coca-Cola under a strategic deal that was completed in June 2015.

PepsiCo’s rival in the snack food category Mondelēz International (MDLZ) reported a 17.8% decline in its revenue as the continued strengthening of the US dollar impacted the company’s international revenue.

Company’s expectations

PepsiCo expects currency fluctuations to have an ~8% adverse impact on its 4Q15 revenue growth and a 10% impact on its full-year fiscal 2015 revenue growth. For the full-year fiscal 2015, PepsiCo expects mid-single-digit growth in its organic revenue.


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