On February 13, prior to the market opening, PepsiCo Inc. (NASDAQ: PEP) reported its fourth quarter and full year 2019 results.
The company exceeded analyst expectations with $ 1.45 non-GAAP earnings per share and $ 20.64 billion in sales (up 5.7%). Analysts had expected earnings per share of $ 1.43 on sales of $ 20.27 billion.
Net income of $ 1.77 billion (with a GAAP profit of $ 1.26 per share) decreased significantly from $ 6.86 billion in the prior-year quarter, mainly due to the loss of a tax increase.
Share prices fell 0.89% to $ 144.80 after midday news.
For the full year, sales were $ 67.16 billion compared to $ 64.66 billion in 2018, while earnings per share were $ 5.53 compared to $ 5.66 in 2018.
PepsiCo is a multinational beverage and food company headquartered in Harrison, New York. It is the owner of the legendary Pepsi soda as well as other popular brand names like Lay’s and Quaker Oats. With around two dozen billion dollar brands under the roof, it is one of the largest food and beverage companies, although, unlike rival Coca-Cola (KO), it has largely remained in the beverage market.
As of February 13, PepsiCo had a market capitalization of $ 203.7 billion, a price-to-earnings ratio of 16.68 and a forward price-earnings ratio of 24.15. According to the Peter Lynch chart, stocks are trading slightly above their fair value.
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PepsiCo saw sales increase in North America (4%), Latin America (5%), Europe (15%), Africa, the Middle East and South Asia (3%) as well as in the Asia-Pacific region and China (8%).
Certain corporate tax benefits from the Tax Cut and Employment Act are no longer in effect. Instead of boosting net income by $ 4.93 billion as in the fourth quarter of 2018, taxes in 2019 reduced $ 430 million from net income. The law resulted in an unusual increase in PepsiCo’s earnings per share, which should now return to normal levels.
In Europe, PepsiCo acquired SodaStream International, which manufactures vending machines that convert shallow water to carbonated water. The acquisition increased the operating result in the European division.
The company’s sales have been recovering since 2015, when the rise in the value of the US dollar caused a currency headwind of 10%, which affected international sales. Approximately 40% of PepsiCo’s sales come from international sales, making sales particularly vulnerable to the volatility of the US dollar.
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PepsiCo plans to switch to 100% renewable energy in its direct U.S. operations in 2020, which could be an advantage for environmentally conscious customers.
The company has also announced that it will increase its annual dividend by 7% from June 2020 payment to $ 4.09 per share.
“We expect organic sales growth of 4% and core currency-adjusted core growth of 7% in 2020. We will continue to invest in our business and strive to develop beneficial skills that will strengthen our business in the long term,” said Chairman and CEO Ramon Laguarta said in result report.
Disclosure: The author has no shares in the named shares.
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