PepsiCo’s Stock Reacts Positively to 3Q16 Results



Market reaction

PepsiCo’s (PEP) stock price rose 0.4% to $107.76 on September 29, in reaction to the company’s fiscal 3Q16 results. As we discussed in Parts 1 and 2 of this series, PepsiCo exceeded analysts’ earnings and sales estimates for fiscal 3Q16, which ended on September 3, 2016. The company also raised its earnings guidance for fiscal 2016.

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YTD movement

On a YTD (year-to-date) basis, PepsiCo’s stock price has risen 9.1% as of September 29. The company’s stock has outperformed peers in the nonalcoholic beverage industry YTD. The stock prices of Coca-Cola (KO), Dr Pepper Snapple (DPS), and Monster Beverage (MNST) have moved -0.9%, -1.6%, and 0.7%, respectively, YTD. As of September 29, PepsiCo has also outperformed the S&P 500 Index, which has risen by 6.9% YTD.

PepsiCo is featured among the top-ten holdings of the Consumer Staples Select Sector SPDR Fund (XLP) and accounts for 4.8% of the fund.

Dividends and share repurchases

PepsiCo also rewards its investors through dividends and share repurchases. The company plans to return $7 billion to shareholders in fiscal 2016 by means of $3 billion of share repurchases and $4 billion of dividends. PepsiCo is a dividend aristocrat, which means that it has increased its annual dividend for at least 25 consecutive years. Earlier this year, PepsiCo announced a 7.1% rise in its annualized dividend to $3.01 per share, marking the 44th-consecutive year of dividend increases. This increase became effective with the dividend paid in June 2016.

We’ll discuss PepsiCo’s valuation in the next and final part of this series.


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