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PepsiCo, Inc. (PEP) Tops Q4 EPS by 4c

February 13, 2014 7:01 AM EST
PepsiCo, Inc. (NYSE: PEP) reported Q4 EPS of $1.05, $0.04 better than the analyst estimate of $1.01. Revenue for the quarter came in at $20.12 billion versus the consensus estimate of $20.16 billion.

-- Organic revenue grew 4.1 percent primarily reflecting effective net pricing. Reported net revenue grew 1 percent. Structural changes, principally the refranchising of the company's beverage operations in Vietnam, negatively impacted reported net revenue performance by 1 percentage point and foreign exchange translation had a 3-percentage-point unfavorable impact on reported net revenue in the quarter.

-- Core constant currency operating profit rose 1 percent reflecting the impacts of revenue growth and productivity savings, offset by operating cost inflation, negative geographic mix and $56 million of incremental investments. Reported operating profit rose 8 percent and included restructuring and impairment costs in both 2013 and 2012 as well as the overlap of a lump sum pension settlement charge recorded in 2012.

-- The company's core effective tax rate was 28.2 percent and the reported effective tax rate was 19.0 percent, both above the prior year quarter.

~ Looking Ahead ~

The company expects 7 percent core constant currency EPS growth in 2014 versus its fiscal 2013 core EPS of $4.37, consistent with its long-term target of high-single-digit core constant currency EPS growth. Based on the current foreign exchange market consensus, it currently expects foreign exchange translation to have an unfavorable impact of approximately 4 percentage points on full year core EPS performance in 2014.

Excluding the impact of structural changes and foreign exchange translation, organic revenue is expected to grow mid-single digits versus 2013, consistent with the company's long-term target. Based on the current foreign exchange market consensus, the company currently expects foreign exchange translation to have an unfavorable impact of approximately 3 percentage points on full year net revenue growth.

In addition for 2014, the company expects:

-- Low-single-digit commodity inflation;
-- Productivity savings of approximately $1 billion;
-- Higher interest expense driven by increased debt balances; and
-- A core effective tax rate of approximately 25 percent.

The company is targeting over $10 billion in cash flow from operating activities and more than $7 billion in free cash flow (excluding certain items) in 2014. Net capital spending is expected to be approximately $3 billion in 2014, within the company's long-term capital spending target of less than or equal to 5 percent of net revenue.

For earnings history and earnings-related data on PepsiCo, Inc. (PEP) click here.

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