PepsiCo earnings in line with estimates but forecasts weak 2019

 cnbc.com  02/15/2019 10:48:20  2  Amelia Lucas
An employee pours Pepsi from a soft drink pump behind the bar of a restaurant.
Chris Ratcliffe | Bloomberg | Getty Images
An employee pours Pepsi from a soft drink pump behind the bar of a restaurant.

PepsiCo on Friday reported quarterly earnings and revenue that met analysts' expectations, but said it expects weaker earnings for 2019 amid currency headwinds, a rising effective tax rate and increased investments in advertising.

Like rival Coca-Cola, the global snack and beverage giant is facing foreign exchange pressure. In addition, it is also bracing for the impact of an effective tax rate it expects to rise to 21 percent from 18.8 percent, as well as increased spending on advertising and marketing.

The food and beverage giant is forecasting that it will earn $5.50 per share during 2019, down from its 2018 earnings per share of $5.66. Wall Street had expected the company to earn $5.86 in 2019, according to Refinitiv estimates.

For the fourth quarter, PepsiCo earned $1.49 per share, excluding merger and integration charges, net tax benefits and other items, meeting Wall Street's expectations.

The company reported net sales of $19.52 billion, matching analysts' expectations and unchanged from a year earlier.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.49 vs. $1.49 expected
  • Revenue: $19.52 billion vs. $19.52 billion expected

PepsiCo has been investing in advertising and marketing for its North American beverage business to help revive brands like Pepsi and Mountain Dew sodas, as they face steep competition from Coca-Cola. Those investments have helped return its North American beverage business to growth. The comeback continued into this quarter, with the unit posting 2 percent growth.

Its snack business, meantime, remained strong, delivering 4 percent organic revenue growth in North America for the fourth quarter. PepsiCo said Friday it is continuing to add more nutritious snacking options like Off the Eaten Path and Sunchips. Last year, it acquired Bare Snacks, which makes fruit and vegetable snacks.

Along with expected investments in 2019, PepsiCo said Friday will also continue to target targeting annual savings of at least $1 billion through 2023. It will achieve those savings part through automation, changing its go-to market systems and simplifying its organization. The program is an extension of a prior savings plan that was expected to end after 2019.

In December, PepsiCo completed its $3.2 billion acquisition of SodaStream, the at-home sparkling drink maker. With the exception of the SodaStream deal, PepsiCo under former CEO Indra Nooyi largely stayed away from making deals larger than $200 million in her last few years as chief executive. Current CEO Ramon Laguarta took the reins in October.

PepsiCo reported fiscal fourth-quarter net income of $6.85 billion, or $4.83 per share, up from a loss of $710 million, or 50 cents per share, a year earlier.

The company also announced Friday that it is increasing its dividend by 3 percent, to $3.82 from $3.71, beginning in June.

Correction: Pepsi's planned 2019 investments include those for advertising and marketing. A previous version misstated the nature of them.

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