PepsiCo, Inc. (NASDAQ: PEP) stock fell 1.80% on October 2nd, 2018 (Source: Google finance) after the company’s third quarterly profit margins disappointed investors as commodity and transportation costs jumped, overshadowing an earnings beat fueled by growth in emerging markets and a rebound in North American beverage sales. For the third quarter, PEP delivered better-than-expected third-quarter earnings that reflected signs of growing demand for its Gatorade, cola, teas and other beverages marking a victory for Indra Nooyi on her last day at work. Nooyi will step down as Pepsi’s chief executive officer on Wednesday, will handle the reins to company President Ramon Laguarta. She will stay on as chairman until early 2019.
PEP in the third quarter of FY 18 has reported the adjusted earnings per share of $1.59, beating the analysts’ estimates for the adjusted earnings per share of $1.56. The company had reported the adjusted revenue growth of 1.5 percent to $16.5 billion in the third quarter of FY 18, beating the analysts’ estimates for revenue of $16.4 billion. The company reported a 2.3 percent rise in North American beverage sales, the first increase in five quarters, as it introduced more non-carbonated drinks and sparkling water such as Lifewtr and Bubly, and added healthier options to its sports drink brand Gatorade. The increased expenses, along with rising aluminum and freight costs, hit PepsiCo’s core operating profit margin, which fell to 17.6 percent. To offset the rising costs, the company in September began to raise prices in developed markets. Frito-Lay North America delivered balanced volume growth and net price realization driving by strong innovation and brand marketing. LIFEWTR achieved more than $150 million in measured retail sales in 2017 which was its introductory year. And is on pace to achieve more $200 million in measured retail sales in 2018.
PEP now expects 2018 earnings of approximately $5.65 a share. The company’s previous guidance was earnings of approximately $5.70 per share and the current consensus earnings estimate is $5.69 per share for the year ending December 31, 2018. The company said a strong dollar will negatively impact its fiscal year earnings by one percentage point.
On the other hand, Over the summer, Doritos and Mountain Dew partnered on the Worlds Collide program to appeal to the Gen Z consumers who thrive on accelerating experiences. The program highlighted the brands recent innovations, Doritos Blaze and Dew Ice and rewarded consumers to purchase both products with merchandise and experiences.