PepsiCo, Inc. Q3 2017 Earnings: Shares Fall On Reduced Outlook


Pepsi Q3 2017 earnings were released before opening bell this morning. The soft drink and snack maker reported $1.48 per share in adjusted earnings on $16.24 billion in sales. Analysts had been expecting $1.43 per share in adjusted earnings and $16.35 billion in revenue. In last year’s third quarter, Pepsi reported $16.03 billion in sales and $1.40 per share in adjusted earnings.

On a GAAP basis, Pepsi Q3 2017 earnings came in at $1.49 per share, up from $1.37 per share in last year’s third quarter. The company said its third quarter results were impacted by restructuring and mark-to-market impacts on commodities. Pepsi’s reported gross margin expanded 10 basis points, while its core gross margin contracted 15 points. Currency headwinds impacted the company’s reported earnings per share growth by 1 percentage point.

“Each of our operating sectors delivered results in line with or ahead of our expectations, with the exception of North America Beverages (NAB) where revenues declined following two consecutive years of very strong third-quarter growth,” Pepsi Chairman and Chief Executive Indra Nooyi said in a statement. “Despite the challenges in our NAB business, the PepsiCo portfolio overall generated revenue, operating profit and earnings per share growth.”

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Sales in Pepsi’s Frito Lay North America grew 3% year over year on a reported basis, while Quaker Foods North America sales rose 1%. North America Beverages sales fell 3% on a reported basis, while Latin America sales increased 6%. Sales from the Europe Sub-Saharan Africa region grew 8%, while Asia, Middle East and North Africa sales fell 4% year over year.

The Pepsi Q3 2017 earnings release also included updates to guidance. The beverage and snack maker slashed its sales growth guidance to about flat with last year, while management had previously said that it expected sales to grow by about 3% from last year’s number.

Nooyi said despite the lowered revenue outlook, the company is on track to beat its full-year earnings per share outlook, which was set at the beginning of the year. Pepsi projects full-year core earnings per share of $5.23, compared to $4.85 per share in 2016. The company also reduced its currency headwind estimate to 1 percentage point from the previous 2 percentage points it had been estimating. Pepsi also said that this year will have one extra week, which will impact revenue growth.

Following the Pepsi Q3 2017 earnings release, the company’s stock fell by as much as 1.89% to $107.07 in premarket trading.