PepsiCo Inc. (NASDAQ: PEP) released its Q4 2021 earnings report on Thursday, February 10, 2022, beating revenue expectations, but the stock dropped 2.5% to $167.66.
What to look for: The company is experiencing the impacts of inflation across all segments. For instance, with Frito-Lay North America, the company has had to pay more for packaging and cooking oil. Also, commodities and transportation have become pricier. However, the company is passing higher costs to consumers, and the price of some of its products has already increased. CFO Hugh Johnston stated that despite then cost challenges, PepsiCo has pricing power and brand loyalty which will get the company through 2022 with margins being intact.
Earnings: Stockearning’s Estimated EPS was $.52 per share, but the soft drinks and snacks company reported adjusted earnings per share of $1.53 in Q4 2021. The company's net income in Q4 was $1.32 billion or $0.95 per share compared to net income of $1.85 billion or $1.33 per share in Q4 2020. For Fiscal 2022 the company expects earnings of $6.67 per share, which is short of Stockearning’s Estimated EPS of $6.73 per share. However, historical EPS Performance in the past 12 quarters indicates that the company has topped earnings estimates in all 12 quarters.
Revenue: The company’s revenue exceeded expectations by $1 billion at $25.25 billion compared to Wall Street projections at $24.24 billion. A year ago, the company reported revenue of $22.5 billion. Organic revenue stripping from divestitures and acquisitions was up 11.9%. For fiscal 2022 the company expects organic revenue to jump 6%, topping analysts estimates of 5.4%. In addition, PepsiCo has raised its yearly dividend by 7% from$4.3 to $4.6 per share, and the board has approved a share repurchase program of $10 billion for the next four years.
Stock movement: PEP shares have gained 14.5% since the company released its third-quarter earnings. Interestingly, PEP shares have been UP 27 times out of the past 46 quarters. So, the historical price reaction suggests a 58% probability of the share price going UP following the fiscal Q4 2021 earnings release. According to the Stockearning algorithm, the predicted first-day move is 1%, while the predicted move on the seventh day is 2%.
What analysts are saying: Morgan Stanley analyst Dara Mohsenian increased his price target on PEP from $172 to $188 and maintained a Buy rating on the stock. The analyst feels that with favourable execution changes, a mix change to high growth snacks and international operations, and improving beverage trends, the company has sustainably expedited organic sales growth. He added that despite the almost 1000 basis points outperformance in stock since the start of November relative to the S&P 500, he still likes Pepsi ahead of the solid Q4 2021 report and in-line 2022 sales outlook.
JPMorgan analyst Andrea Teixeira increased his price target on the stock from $171 to $185 and maintained a Buy rating ahead of the Q4 2021 earnings release. The analyst indicated that she expected underlying consumer demand to remain strong, and the company's additional pricing actions in the fall started to flow in Q4. Interestingly she feels PEP is a core staples holding.
Also, Credit Suisse analyst Kaumil Gajrawala raised his price target in PepsiCo from $157 to $166 and maintained a hold rating on the shares. The analyst contends that the company's robust pandemic execution sets it will make relative to competitors steering the turbulent labour and sourcing environment. Gujranwala sees PEP as a safe haven amid secular and macro volatile and expects margin pressure to dominate in the coming months.
Related News
Amgen Inc. (NASDAQ: AMGN) Earnings Expectations, Q4 2021 EPS of $4.11 On Revenue of $6.91 Billion
Bristol-Myers Squibb Company (NYSE: BMY) Expects Q4 2021 EPS of $1.84 on revenue of $12 Billion