PepsiCo, Inc. (NASDAQ: PEP) stock trades strong on solid results

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PepsiCo, Inc. (NASDAQ: PEP) stock rose over 1.09% (as of 11:34 am GMT-4; Source: Google finance) after the company posted better than expected results for the third quarter of FY 19. PEP has ramped up advertising spending by 12% this year on campaigns for its Pepsi colas, Mountain Dew, Gatorade and other products. The company has partnered up with stars like Chrissy Tiegen, and recently launched a campaign in conjunction with the 100th anniversary of the NFL. Net income decreased to $2.1 billion in the third quarter, from $2.5 billion a year earlier. The company’s income-tax provision almost tripled, contributing to the decline in profit.

PEP in the third quarter of FY 19 has reported the adjusted earnings per share of $1.56, beating the analysts’ estimates for the adjusted earnings per share of $1.50, according to FactSet consensus. The company had reported the adjusted revenue growth of 4.3 percent to $17.19 billion in the third quarter of FY 19, beating the analysts’ estimates for revenue of $16.93 billion. The company expects growth of at least 4% for the year.

Moreover, for PepsiCo Beverages North America, the company posted 3% organic revenue growth in the quarter, due to solid net price realization, the result of effective revenue management execution. The third quarter growth accelerated sequentially from the second quarter and was on top of 2.5% organic revenue growth achieved in the third quarter of 2018. Gatorade has generated mid-single-digit net revenue growth and improved sequential market share performance. Innovation is the key factor for Gatorade’s performance, led by Gatorade Zero, which has surpassed $0.5 billion in retail sales since its launch in May of last year. And the company had recently launched Bolt24, a new functional beverage that supports athletes around the clock by providing advanced all-day hydration.

The company has benefitted from improved local market focus and execution due to the streamlined field structure, increased go-to-market capacity and significant stepped up advertising support and innovation.

For FY 19, the company expects core effective tax rate of about 21 percent. The company projects the fall in core constant currency EPS of about 1 percent. The company projects approximately $9 billion in cash from operating activities and free cash flow of approximately $5 billion, which means that net capital spending will be of approximately $4.5 billion.  Total cash returns to shareholders will be of approximately $8 billion, comprising of dividends of approximately $5 billion and share repurchases of approximately $3 billion.

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