Stock Market News – PepsiCo quarterly results in focus as earnings season kicks off
July 9, 2018 3:26 pm
Beverage company PepsiCo will be releasing its Q2 earnings report before Tuesday’s opening bell on Wall Street. The consensus recommendation for the company is “buy”, with the average consensus recommendation for Non-Alcoholic Beverages, its peer group, being a “hold”. The firm’s release constitutes one of the first of the upcoming earnings season, with big banks being in line to release their respective results on Friday.
According to analysts submitting their projections to Thomson Reuters’ estimate system (the Institutional Brokers’ Estimate System – I/B/E/S), the firm, which is also in the food and snacks businesses, is forecast to have made $1.52 in earnings per share (EPS) during the quarter ending in June. Current expectations represent a downward revision from $1.53 from four weeks ago. If the firm’s bottom line comes in line with forecasts, this would represent an increase by around 1.5% relative to the corresponding quarter from last year when the corporation earned $1.50 per share. In the meantime, Wall Street analysts’ EPS projections range from $1.47 to $1.60, while the company managed to exceed analysts’ average estimates in all four quarters that preceded.
Another earnings beat could generate buying interest for PepsiCo’s stock, with immediate resistance to price advancing possibly coming around the 50% Fibonacci retracement level of the January 23 to May 9 downleg at $109.23 – the region surrounding this point was congested as well in previous months. An upside break would turn the attention to the current level of the 200-day moving average at 110.35 and then to the 61.8% Fibonacci mark at $112.37. Conversely, a data miss might exert downside pressure on the share price. Support to declines could come from the zone around the 38.2% Fibonacci level at $106.09, with sharper losses shifting the focus to the 23.6% Fibonacci at 102.21 – this is where the 50-day MA roughly lies at the moment as well. Empirically, larger deviations between expected and actual results lead to more profound moves in a given corporation’s share price.
Using the RSI to gauge the beverage maker’s short-term momentum, the indicator remains in bullish territory above 50, though it is declining at the moment in what could be an early sign for a bearish bias in the near-term. Still, it is early to conclude in that direction and tomorrow’s results could shift the bias in either direction.
Besides the earnings number, investors will also be paying attention to revenues. Specific interest may fall to the North American market which delivered negative sales growth in the previous quarter, with revenue growth in international markets also being of importance as they constitute a large fraction of the multinational’s sales (see revenue breakdown chart below). The gross margin, which also fell in Q1 will be eyed as well, while the management’s guidance regarding the outlook can also spur movements in the share price; the fall in gross margin was partly attributed to rising commodity prices, something which could also be the case in Q2.
PepsiCo is an S&P 500 component stock. Year-to-date, the firm’s stock price is trading lower by 9.6%, which compares to the S&P’s equivalent positive performance of 3.7%. Analysts’ mean and median price targets on the company’s stock stand at $114.74 and $115.00 correspondingly, pointing to upside potential relative to where the stock currently trades. With respect to valuation considerations, the corporation’s forward P/E ratio (price over forecasted earnings over the next twelve months) is at 18.72, below its peer group’s respective number. This might indicate an undervalued stock, or one that lacks growth prospects, at least from the market’s perspective.
The following chart shows the reinvested total return from an investment in PepsiCo and the S&P 500 five years ago. One such investment in the former would have yielded 56.6%, underperforming the benchmark’s 87.6%.
Some of the notable names releasing results as the week unfolds are banking giants JPMorgan Chase, Citigroup and Wells Fargo. The slew of corporate earnings over the coming weeks are likely to steal part of the thunder from global trade considerations – the US-China spat – which have driven sentiment in recent weeks, thus affecting positioning in equity markets. Still, any major trade developments may lead to investments in and out of equities, overshadowing corporate releases.
Lastly, Factset estimates put the S&P 500’s earnings growth rate at 20.0% in Q2, which if true it will constitute the second highest earnings growth since Q3 2010.
Beverage company PepsiCo will be releasing its Q2 earnings report before Tuesday’s opening bell on Wall Street. The consensus recommendation for the company is “buy”, with the average consensus recommendation for Non-Alcoholic Beverages, its peer group, being a “hold”. The firm’s release constitutes one of the first of the upcoming earnings season, with big banks being in line to release their respective results on Friday.
According to analysts submitting their projections to Thomson Reuters’ estimate system (the Institutional Brokers’ Estimate System – I/B/E/S), the firm, which is also in the food and snacks businesses, is forecast to have made $1.52 in earnings per share (EPS) during the quarter ending in June. Current expectations represent a downward revision from $1.53 from four weeks ago. If the firm’s bottom line comes in line with forecasts, this would represent an increase by around 1.5% relative to the corresponding quarter from last year when the corporation earned $1.50 per share. In the meantime, Wall Street analysts’ EPS projections range from $1.47 to $1.60, while the company managed to exceed analysts’ average estimates in all four quarters that preceded.
Another earnings beat could generate buying interest for PepsiCo’s stock, with immediate resistance to price advancing possibly coming around the 50% Fibonacci retracement level of the January 23 to May 9 downleg at $109.23 – the region surrounding this point was congested as well in previous months. An upside break would turn the attention to the current level of the 200-day moving average at 110.35 and then to the 61.8% Fibonacci mark at $112.37. Conversely, a data miss might exert downside pressure on the share price. Support to declines could come from the zone around the 38.2% Fibonacci level at $106.09, with sharper losses shifting the focus to the 23.6% Fibonacci at 102.21 – this is where the 50-day MA roughly lies at the moment as well. Empirically, larger deviations between expected and actual results lead to more profound moves in a given corporation’s share price.
Using the RSI to gauge the beverage maker’s short-term momentum, the indicator remains in bullish territory above 50, though it is declining at the moment in what could be an early sign for a bearish bias in the near-term. Still, it is early to conclude in that direction and tomorrow’s results could shift the bias in either direction.
Besides the earnings number, investors will also be paying attention to revenues. Specific interest may fall to the North American market which delivered negative sales growth in the previous quarter, with revenue growth in international markets also being of importance as they constitute a large fraction of the multinational’s sales (see revenue breakdown chart below). The gross margin, which also fell in Q1 will be eyed as well, while the management’s guidance regarding the outlook can also spur movements in the share price; the fall in gross margin was partly attributed to rising commodity prices, something which could also be the case in Q2.
PepsiCo is an S&P 500 component stock. Year-to-date, the firm’s stock price is trading lower by 9.6%, which compares to the S&P’s equivalent positive performance of 3.7%. Analysts’ mean and median price targets on the company’s stock stand at $114.74 and $115.00 correspondingly, pointing to upside potential relative to where the stock currently trades. With respect to valuation considerations, the corporation’s forward P/E ratio (price over forecasted earnings over the next twelve months) is at 18.72, below its peer group’s respective number. This might indicate an undervalued stock, or one that lacks growth prospects, at least from the market’s perspective.
The following chart shows the reinvested total return from an investment in PepsiCo and the S&P 500 five years ago. One such investment in the former would have yielded 56.6%, underperforming the benchmark’s 87.6%.
Some of the notable names releasing results as the week unfolds are banking giants JPMorgan Chase, Citigroup and Wells Fargo. The slew of corporate earnings over the coming weeks are likely to steal part of the thunder from global trade considerations – the US-China spat – which have driven sentiment in recent weeks, thus affecting positioning in equity markets. Still, any major trade developments may lead to investments in and out of equities, overshadowing corporate releases.
Lastly, Factset estimates put the S&P 500’s earnings growth rate at 20.0% in Q2, which if true it will constitute the second highest earnings growth since Q3 2010.
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