Core earnings for PepsiCo Inc. (PEP) climbed 9% in the fourth quarter to $1.15 per share, compared withlast year’s $1.22. The earnings per share surpassed the Zacks Consensus Estimate by 2 cents. The higher earnings were driven by robust revenue growth across its product portfolio. Further, strong pricing partially offset the commodity cost inflation.
The fiscal 2011 core earnings climbed 7% to $4.40,which surpassed the Zacks Consensus Estimate by a penny.
The New York-based company reported growth in volume, revenues, operating profit and earnings per share, fueled by top-line gains across its worldwide snacks and beverage businesses and from the acquisition of Wimm-Bill-Dann (WBD), the leading dairy and Juice Company in Russia.
Based on the fourth quarter 2011 results, PepsiCo projects core constant currency EPS to decline in fiscal 2012 by approximately 5% from its fiscal 2011 core EPS of $4.40, reflecting a combination of strategic and macro-economic factors. The Zacks Consensus Estimate for fiscal 2012 stands at $4.55 per share.
Top Line and Margin Details
Total sales in the quarter jumped 11% to $20.15 billion from $18.15 billion in the prior-year quarter, displaying the benefits of organic volume growth, effective net pricing and favorable foreign exchange. Full-year net revenue increased 16% to $66.5 billion, driven by the benefits of volume growth, effective net pricing, favorable foreign exchange and the impact of the acquisitions of North American anchor bottlers and WBD.
Revenues were also above the Zacks Consensus Estimate of $19.9 billion for the quarter and $66.25 billion for the year.
Core operating profit increased 7%, fueled by effective net pricing, synergies from the bottler acquisition and the impact of the WBD acquisition. However it was partially offset by higher commodity costs.
Segment Details
Revenues from PepsiCo Americas Foods (‘PAF’) gained 10%, while PepsiCo Americas Beverages (‘PAB’) remained almost flat year-over-year. Europe soared 32% and Asia, Middle East & Africa (AMEA) jumped 16%.
Operating profit for PAF advanced 5%, Europe remained flat year over year and AMEA saw operating profit sky-rocketing by 209% in the quarter.
In the PAF segment, Frito-Lay North America (FLNA) and Latin America Foods (LAF), registered increases of 1% and 6% in volume. However, in the Quaker Foods North America (QFNA) segment volume declined by 9%.
Multi-year productivity program undertaken by the company is expected to generate $1.5 billion of incremental cost savings by 2014 through optimization of operating practices and organization structure, including a reduction in force of about 8,700 employees, about 3%of global workforce.
Moreover, the company plans to implement a three-year productivity program that is expected to generate over $500 million in incremental cost savings in 2012, $500 million in 2013, and an additional $500 million in 2014.
Currently, we prefer to be Neutral on Pepsi. Furthermore, it hold a Zacks #4 Rank, which translates into a short-term Sell rating.
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