PepsiCo’s Second Quarter Profits Outshine Forecasts

PepsiCo Inc . NYSE:PEP has recorded second quarter profits of $15.395 billion, ahead of the average analyst estimate of $15.37 billion. One of the spin offs of this is that the company’s stock prices have been moving in the right direction, reaching an all-time high of $109 per share on the NYSE on the evening of June 6, 2016. Earnings per share ended at $1.35, also ahead of analysts’ forecast of $1.30 per share. Investors are no doubt happy about this and the management of the company expects performance to continue along this positive trend, all other things remaining equal. In light of these expectations, the company has adjusted its expected earnings per share for 2016 from $4.66 up to $4.71 per share.
Several factors have contributed to PepsiCo’s performance including a 6% drop in the cost of sales during the quarter ended June 11, 2016. The decreased cost of potatoes which the company uses in its Frito Lay products, has contributed significantly to this. In addition, sales from the Frito Lay line of business grew by as much as 3% while the north American beverage unit recorded a 1% increase in revenues for the quarter.
While Brexit has affected other companies negatively, the impact has not been quite as pronounced for PepsiCo . In fact, the organization is somewhat shielded from the possible effects of Brexit considering that the potatoes that are used in the making of British Walker Chips, are locally grown. Furthermore, consumers in the developed countries have generally found PepsiCo’s products to be quite affordable and management does not expect Brexit to have a huge negative impact on sales.
PepsiCo expects to see better beverage performance results during the balance of the year as it expects to launch several new innovative beverages this year. During the last 5 years, the company has invested heavily in research and development of differentiated products. The focus will be on expanding the range of beverage product offerings, moving away from diet sodas into healthier choices to capture a wider consumer base.

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