PepsiCo Beats Earnings: What You Need to Know
Strong Financial Performance
✓ Total sales came in at $12.89 billion, a 0.5% increase versus
the second quarter in 2013, and roughly in line with analysts’
✓ Core earnings per share came in at $1.32, an annual increase
of 9% in constant currency, and materially better than the
$1.23 per share forecasted on average by analysts.
✓ In a sign of confidence, management raised its constant
currency earnings per share growth forecast for 2014, from
7% to 8%.
“I believe our results reflect the hard work we've done over the
last several years to position our business for sustainable success.
Specifically, our investments to strengthen our brands, innovate
more effectively, expand our geographic footprint with strategic
acquisitions, drive better execution and operate more efficiently
by leveraging our global scale and complementary product
portfolio. Today these actions and investments are producing
consistent tangible results.”
Chairman and CEO Indra Nooyi
Organic revenue grew 3.6% versus the same quarter in the
prior year, with global snacks growing 5% and global beverages
organic revenues increasing 2% during the period.
Price pack revenue management allowed PepsiCo to gain 3% in
effective net pricing during the quarter.
Emerging markets posted strong organic sales growth of 8%
versus the same quarter in the prior year.
Innovation accounted for 9% of net revenue during the quarter.
Frito-Lay North America
Solid performance, with organic revenue growth of 2% and
core constant currency operating profit growth of 5%.
Lay’s, Doritos, and Cheetos, each posting revenue growth
in the single-digits.
Core operating margin expansion of 80 basis points during
the quarter in spite of increased marketing and advertising
Quaker Foods North America
Core constant currency operating profit growth of 5%.
Operating margin expanded 155 basis points.
The company gained share in each of its key categories:
Hot cereal, ready to eat cereal, and snack bars.
PepsiCo Americas Beverage
In North America, non-carbonated beverage volume grew 1%
and carbonated soft drink volume declined 2%.
Latin America organic beverage volume increased 3% during
Core operating profit margin increased 25 basis points.
What Coca-Cola Is Saying About Soft Drinks
“We're seeing a number of encouraging signs across our global
operating system. In the second quarter, brand Coca-Cola grew 1% in
North America along with solid 3% sparkling price mix.
We saw improving volume growth across several key markets in
Europe. Eurasia and Africa continue to deliver balanced volume
growth. Key markets in our Asia Pacific operations delivered strong
performance including 9% growth in China, double-digit growth in
India and 1% growth in Japan and we saw steady execution in the face
of a challenging macro environment in Latin America”
Muhtar Kent - Chairman and CEO of Coca-Cola
Organic revenue increased by a big 8%, led by low-double digit
growth in China, high-single digit growth in Brazil, and mid-single
digit growth in Russia.
Revenues in Mexico are under pressure due to tax increases
translated into higher prices. Volume decline in snacks
moderated sequentially during the quarter, while beverage
volume returned to growth.
The EMEA region was driven by double-digit organic revenue
growth in Thailand, followed by Egypt and the Philippines, which
also grew in the double-digits.
PepsiCo has launched a five-year, $5 billion productivity program
centered on four key areas.
1. More automation in operations to replace labor with capital.
2. Expanding shared services for the handling of routine back
office transaction processing.
3. Restructuring manufacturing to optimize the company´s global
4. Restructuring the go-to-market systems to optimize the
company’s distribution network.
✓ PepsiCo delivered solid financial performance for the second
quarter of 2014, driven by strong snack sales, pricing gains and
healthy demand in emerging markets.
✓ Both PepsiCo and rival Coca-Cola reported stabilizing
carbonated drinks sales in North America. Demand for soft
drinks remains quite encouraging in emerging markets.
✓ Strong sales performance and productivity enhancements bode
well for investors in PepsiCo over the coming years.
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