Yahoo Finance Pepsi's Growth in '15 Likely to be Hit by Fx: Should You Invest? - Analyst Blog
We issued an updated research report on PepsiCo, Inc. PEP on May 11, 2015.
Pepsi beat the Zacks Consensus Estimate for both earnings and revenues in the first quarter of 2015. Earnings of 83 cents per share grew 12% on a constant currency basis driven by increased pricing and productivity gains. Organic revenues grew 4.4% as higher snacks sales made up for softer global beverage performance.
Despite the ongoing global macro challenges, Pepsi performed well in 2014 and so far in 2015. Pepsi’s strong brand portfolio, product and geographic diversity, improved productivity, increased brand building investments and market execution, efforts to innovate and solid cash flow generation are driving growth at the food and beverage giant.
However, Pepsi expects to continue to face macroeconomic headwinds in 2015, mainly due to weakening international currencies and economic slowdown in energy-driven countries due to lower oil prices.
In fact, on the first-quarter call, the company stated that it anticipates a greater-than-previously-expected Fx impact on its 2015 sales and profits.
With around half of its revenues coming from outside the U.S., Pepsi’s sales and profits are being affected by significant currency headwinds due to the recent weakening of many foreign currencies versus the U.S. dollar. Especially, recent currency fluctuations in Venezuela, Russia and Mexico pose a major concern.
Moreover, its carbonated soft drinks (CSD) have been seeing declining sales trends over the past few quarters due to category headwinds. A weak consumer spending environment, cross-category competition and growing health and wellness consciousness — consumers are particularly vigilant about the use of artificial sweeteners, high sugar content and related obesity concern — are hurting CSD demand and thereby the sales of Pepsi as well as other soft drink companies like The Coca-Cola Company KO and Dr Pepper Snapple Group, Inc. DPS.
Stocks to Consider
Pepsi carries a Zacks Rank #4 (Sell). A better-ranked food stock is B&G Foods Inc. BGS sporting a Zacks Rank #1 (Strong Buy).
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COCA COLA CO (KO): Free Stock Analysis Report
DR PEPPER SNAPL (DPS): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
B&G FOODS CL-A (BGS): Free Stock Analysis Report
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