PepsiCo Earnings Preview: Co. Expected To Deliver Single-Digits YoY Decline

Shares of PepsiCo, Inc. PEP are down about 0.5 percent on Wednesday trading, ahead of the announcement of the company’s second quarter financial results, scheduled for Thursday morning, before the market opens.

According to Estimize, the famed foods and beverages maker is expected to report a year-over-year decline in earnings of roughly 5 percent to 7 percent.

In the second quarter of 2014, earnings came in at $1.32 per share, and revenue at $16.894 billion, both up 1 percent year-over-year. However, for the current quarter, the Street is modeling a decline to earnings of $1.23 per share on sales of $15.813 billion, while the crowd is projecting earnings of $1.25 per share on revenue of $15.925 billion.

It should be noted, however, from the chart above, which illustrates the evolution of sentiment over time, that expectations were not always as low. By the beginning of the quarter, both the crowd and experts anticipated a small year-over-year increase in earnings. Nonetheless, this changed as the report date loomed. Consensus estimates now stand at their lowest.

Another thing that should be observed, in the first chart, is that PepsiCo has a history of surpassing estimates. So, a beat this quarter would not be that surprising.

Analyst Opinion

In a recent article, analysts at Zacks also previewed PepsiCo’s earnings. According to the note, the company did well in 2014 and so far this year, even in spite of a challenging global macro environment and currency headwinds.

However, these headwinds are expected to continue through 2015. The experts expect currency to negatively impact second quarter earnings by 12 percent, and revenue, by 11 percent. Interest expenses and tax rates are expected to surge in relation to last year, as well.

“Nevertheless, with a strong snacks business, robust international growth and aggressive cost savings, the company looks well placed to deliver strong results in the future quarters as well,” the analysts conclude.