PepsiCo Reports Surprise Drop in Fourth-Quarter Revenue, but Beats Profit Expectations and Raises Dividend
Shares of PepsiCo Inc. fell 1.1% in premarket trading Friday after the beverage and snack giant reported a surprise drop in fourth-quarter revenue. The company cited weakness in its North America businesses as the primary reason for the decline. However, despite the revenue drop, PepsiCo managed to beat profit expectations and raised its dividend by 7%.
The company’s net income jumped to $1.3 billion, or 94 cents a share, compared to $518 million, or 37 cents a share, in the same period last year. Excluding nonrecurring items, core earnings per share were $1.78, surpassing the FactSet consensus of $1.72. Revenue slipped by 0.5% to $27.85 billion, falling short of the FactSet consensus that predicted an increase of 1.4% to $28.40 billion.
PepsiCo’s North America business segments were hit particularly hard, with PepsiCo Beverages North America revenue falling 2%, Frito-Lay North America revenue declining 3%, and Quaker Foods North America revenue sinking 16%. Despite the disappointing figures, the company remains optimistic about its future and expects to reach a core EPS of “at least” $8.15 by 2024.
Additionally, PepsiCo announced that it will raise its annual dividend to $5.42 a share from $5.06 a share, which will take effect in June. This move showcases the company’s confidence in its ability to weather the current challenges and reward its shareholders.
Overall, PepsiCo’s stock has experienced a 4.6% gain over the past three months. However, it faces stiff competition in the consumer staples sector, with the Consumer Staples Select Sector SPDR ETF increasing by 7.8% and the S&P 500 advancing 15% during the same period.
Factors Behind Fourth-Quarter Revenue Drop
PepsiCo’s unexpected drop in fourth-quarter revenue can primarily be attributed to weakness in its North America businesses. The company saw a decline in revenue in its key segments, including PepsiCo Beverages North America, Frito-Lay North America, and Quaker Foods North America. The reasons behind these declines should be further evaluated to understand the challenges the company is facing in its home market.
Strong Performance in Net Income and Core Earnings
Despite the drop in revenue, PepsiCo reported impressive net income figures for the fourth quarter. Net income jumped from $518 million in the year-ago period to $1.3 billion in the current quarter. Additionally, core earnings per share of $1.78 exceeded the FactSet consensus of $1.72. This strong performance in net income and core earnings showcases the company’s ability to generate profits and perform well in challenging market conditions.
Optimistic Outlook for the Future
PepsiCo remains positive about its future prospects, projecting a core EPS of “at least” $8.15 by 2024. This outlook demonstrates the company’s confidence in its ability to overcome current challenges and continue delivering strong financial results. Investors should carefully consider this optimistic outlook when evaluating the long-term investment potential of PepsiCo.
Dividend Increase Highlights Company’s Confidence
In a reassuring move for shareholders, PepsiCo announced a 7% increase in its annual dividend. The dividend will rise to $5.42 a share, up from $5.06 a share, and will come into effect in June. This increase underscores the company’s confidence in its financial strength and ability to generate consistent cash flow to support its dividend payments.
Challenging Competition in the Consumer Staples Sector
While PepsiCo’s stock has gained 4.6% over the past three months, it faces stiff competition in the consumer staples sector. The Consumer Staples Select Sector SPDR ETF has grown by 7.8% during the same period, while the S&P 500 has seen a 15% increase. PepsiCo will need to navigate this competitive landscape to maintain its market share and drive future growth.
Analyst comment
Positive:
– PepsiCo beat profit expectations and raised its dividend by 7%, demonstrating strong financial performance.
– The company remains optimistic about its future, projecting a core EPS of “at least” $8.15 by 2024.
– PepsiCo’s net income jumped significantly, showcasing its ability to generate profits in challenging market conditions.
– The dividend increase highlights the company’s confidence in its financial strength.
Negative:
– PepsiCo reported a surprise drop in fourth-quarter revenue, primarily due to weakness in its North America businesses.
– Revenue slipped by 0.5%, falling short of expectations and indicating challenges in the company’s home market.
– PepsiCo’s North America business segments, including PepsiCo Beverages North America and Frito-Lay North America, experienced declines in revenue.
Neutral:
– PepsiCo’s stock has gained 4.6% over the past three months, but it faces stiff competition in the consumer staples sector.
