What Can Investors Expect from PepsiCo’s 3Q15 Earnings?
PepsiCo's 3Q15 Earnings Preview: Will the Company Gain Momentum?
Earnings expectations
PepsiCo’s (PEP) third quarter earnings will be announced on October 6. The consensus Wall Street analyst earnings estimate for 3Q15, which ended on September 5, is $1.27 per share. The 3Q15 consensus analyst estimate represents a 6.5% fall compared to adjusted earnings in the third quarter of the previous year.
For fiscal year 2015, the consensus analyst earnings estimate is $4.54 per share. PepsiCo expects its core EPS (earnings per share) for fiscal 2015 to come in at $4.49. Currency headwinds are expected to adversely impact core EPS by 11 percentage points.
Earnings in the previous quarter
PepsiCo’s adjusted EPS in 2Q15 came in at $1.32, ahead of the consensus earnings estimate of $1.24. The 2Q15 adjusted EPS was unchanged compared to the corresponding quarter of the previous year. The adjusted EPS for 2Q15 excluded mark-to-market charges on commodity hedges of $0.02 per share and restructuring charges of $0.01 per share.
PepsiCo’s earnings beat analyst earnings estimates in all four quarters of 2013 and 2014 and the first two quarters of fiscal 2015. PepsiCo makes up 0.8% of the portfolio holdings of the iShares Core S&P 500 ETF (IVV) and 6.8% of the iShares US Consumer Goods ETF (IYK).
Coca-Cola (KO) also beat analyst earnings estimate in 2Q15. However, the company’s adjusted EPS fell 1.6% from the corresponding quarter of the previous year due to lower revenue. Dr Pepper Snapple (DPS) posted a 6.6% rise in its 2Q15 adjusted EPS driven by higher revenue and lower expenses. Monster Beverage’s (MNST) 2Q15 adjusted earnings fell 3.7% due to the impact of higher tax expenses, subdued sales growth, and higher diluted outstanding shares.
Expected headwinds in 3Q15
Adverse foreign currency fluctuations are expected to have a 12 percentage point impact on PepsiCo’s core EPS growth in 3Q15. The company also expects its Quaker Foods North America profit to fall in 3Q15 due to an unfavorable comparison with the third quarter of the previous year, which included a gain on the sale of the cereal business. PepsiCo’s 3Q15 earnings are expected to be impacted by higher net interest expense and a higher tax rate compared to 3Q14.
In the next part of this series, we’ll look at revenue expectations from PepsiCo in 3Q15.
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