PepsiCo Inc. (PEP) reported fourth quarter and full fiscal 2010 results.
New York-based PepsiCo’s core earnings advanced 17% to $1.05 per share in the quarter compared to the year-ago period. Earnings were a penny above the Zacks Consensus Estimate of $1.04.
The year-over-year growth reflects the acquisition of its two anchor bottlers, broad-based gains across its snack and beverage portfolio in key international markets, disciplined investments and prudent cost controls.
For the full year, earnings grew 12% year-over-year to $4.13 a share. Annual earnings were also a penny above the Zacks Consensus Estimate.
Based on the fourth quarter and full year results, PepsiCo expects earnings per share growth of 7%–8% on the basis of core constant currency from its fiscal 2010 earnings of $4.13 per share.
Top Line and Margin Details
The quarterly total sales jumped 37% to $18.2 billion in the quarter from $13.3 billion in prior-year quarter, demonstrating strong growth across its business. Revenues were also above the Zacks Consensus Estimate of $17.7 billion.
Top line for fiscal 2010 also advanced 34% year-over-year to $57.8 billion versus $43.2 billion in fiscal 2009. Annual revenues were also above the Zacks Consensus estimate of $57.3 billion.
In the quarter, gross margin expanded 128 basis points (bps) to 54.0% versus the prior year period. PepsiCo registered an operating profit of $2.2 billion, up 10% compared with $2.0 billion in the earlier year period. For the full year 2010, operating profit increased 4% to $8.3 billion.
Segment Details
In the quarter, revenues from the company’s four segment namely PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB); Europe; and Asia, Middle East & Africa (AMEA) jumped 3%, 129%, 36% and 19%, respectively. Operating profit for PAF; PAB and AMEA advanced 10%, 40% and 31% respectively. However, the Europe segment reported an operating loss of 16%.
PAF registered solid volume growth and improved cost structure, partly offset by investments in innovation and infrastructure.
PAB results reflect favorable impact of the bottling acquisitions, and improving sequential organic volume trends across the product portfolio and synergies.
Revenues and operating profit growth in Europe represent volume expansion of both the snack and beverage business. Furthermore, the acquisition of two bottling and productivity initiatives boosted Europe’s performance.
AMEA’s performance benefited from increasing volume both at snacks and beverages business, robust productivity initiatives, tight cost controls offsetting cost inflation.
Financial Update
PepsiCo exited the year with cash and cash equivalents of $5,943 million. The company repurchased shares worth $5 billion during the year. In keeping with the company’s strategy of returning incremental value to shareholders, PepsiCo intends to repurchase shares worth $2.5 billion in fiscal 2011. During the year, the company paid dividends worth $3 billion.
PepsiCo’s operating cash flow jumped 24% year over year to $8.4 billion and operating cash flow, net of capital expenditures was $5.4 billion for the year 2010.
For the year, PepsiCo targets an operating cash flow of around $7.9 billion and operating cash flow, net of capital expenditures, to be about $4.3 billion. Capital expenditure for the fiscal 2010 is forecasted at $3.6 billion.
Recently, in February 2011, the company acquired Wimm-Bill-Dann, a Russian based preeminent food and beverage company. This acquisition further strengthens PepsiCo’s competitive position in Russia and Eastern Europe, while providing a strong foothold in the attractive dairy category.
However, the company has also cautioned about the headwinds it expects in 2011. Firstly, the high level of unemployment leading to a poor macroeconomic picture, second, increasing cost inflation and third, challenging pricing environment, especially in beverages.
In spite of a sluggish market, PepsiCo aspires to deliver solid and persistent growth. The company continues to expand in the developed and emerging markets through its innovation in the snacks and beverage portfolio.
PepsiCo’s arch rival, The Coca Cola Company (KO) reported fourth quarter and full year results yesterday. Coca Cola’s quarterly earnings came in at 72 cents a share, which were in line with the Zacks Consensus Estimate but were up 9.0% year-over-year.
COCA COLA CO (KO): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
Zacks Investment Research
