Pepsi released its latest earnings report before opening bell this morning, posting adjusted earnings of $1.35 per share and sales of $16.3 billion, a 5% year over year decline. Analysts had been expecting earnings of $1.26 per share and revenue of $16.22 billion.
Shares of Pepsi moved higher in premarket trades this morning, climbing as much as 1.77% to $95.83 per share after the earnings beat.
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Pepsi earnings hit by Venezuelan charges
Pepsi reported GAAP earnings of 36 cents per share, including charges related to accounting changes taken in its Venezuelan business, which amounted to 92 cents per share.
The beverage maker recorded an organic growth rate of 7.4% in revenue and a 5% decline in net revenue. The company’s core gross margin expanded 120 basis points, while its core operating margin expanded 60 basis points. Management said the improvements in margins reflect the new revenue management strategies and productivity initiatives. Pepsi’s core constant currency operating profit rose 12%, while its reported operating profit declined 50%, including the charges from the Venezuelan business, unfavorable currency exchange impacts, and a write-off for the Tingy-Asahi Beverages Holding call option.
Pepsi reported a 1% organic volume growth rate and 3% organic revenue growth in its Frito Lay North America division. Quaker Foods North America saw its organic volume and revenue each rise 1%, while the North American Beverages segment recorded a 1% unit growth rate and a 3% organic revenue growth rate. In Latin America, the company saw revenues climb 25% while volumes increased 1.5% in the region.
In the Europe Sub-Saharan Africa region, Pepsi saw a 0.5% increase in volume and 1.5% increase in revenue, while in Asia, the Middle East, and North Africa, the company saw a 4% increase each in volumes and revenues.
Pepsi raises earnings guidance
Pepsi management increased their core constant earnings per share guidance for the full year. Previously they had guided for a growth target of 8%, but they bumped that up to 9% for this year. They expect foreign currencies to have an 11 percentage point negative impact on the company’s results. Pepsi is on track to record about $1 billion in productivity savings and return $9 billion cash to shareholders.
Management continues to expect organic revenue growth in the mid-single digits and commodity inflation in the low- to mid-single digits.