PepsiCo Q2 Earnings Preview | HF Analysis

July 12, before market open, PepsiCo will release its financial report for the second quarter of fiscal 2022, providing investors with an update on the company’s performance in Q2 2022. In light of the previous quarter’s success, in which PepsiCo exceeded Wall Street’s expectations, the company is set to achieve another record quarter.

Given the recent heightened fears about economic slowdowns, rising inflation, and a full-fledged recession, it is heartening that global food and beverage giant PepsiCo has done very well in 2022.

PepsiCo has been able to maintain profitability despite increased labor, transportation, and raw material expenses so far. However, with inflation rates growing so rapidly over the previous few months, investors will need to consider whether PepsiCo can continue to manage rising expenses in the forseeable future to retain its profitability.

First-quarter adjusted profits were $1.21 per share, a 13 percent year-over-year increase that above analyst expectations of $1.12 per share [1].

The net revenue increased by 6.8 percent to $14.82 billion, above the consensus forecast of $14.55 billion. Organic income increased by 2.4% annually[1].

The food and beverage giant declared a $193 million after-tax impairment charge as it attempts to abandon or reposition several of its juice and dairy brands in Russia. The charge reduced profits by 14 cents per share [2].

Soda and iced tea from PepsiCo will have 25% less sugar by 2025 in the European Union, the company’s second biggest market. The firm wants to offer healthier snacks by 2025 in hopes of attaining a tenfold rise in sales by 2025 and reaching a $1 billion portfolio by 2030. The European Union (EU) has implemented tariffs on sugary beverages as a means of preventing obesity. This has put pressure on beverage manufacturers to lower sugar content.

“We don’t expect the business to deliver a lot of growth this year, given all of the challenges and the decisions we’ve made,” CFO Hugh Johnston[3]

The company executives said that due to COVID and hike in fuel prices the brick-and-mortar stores are seeing less foot traffic, but this hasn’t impacted consumer behavior meaningfully.

“I am very proud of how our people and business have performed while operating in a dynamic and complex environment due to the ongoing deadly conflict in Ukraine. The humanitarian impact is especially tragic and beyond what words can describe. Our priority continues to be the safety, well-being, and security of our Ukrainian associates and we join all those praying for peace,” said Chairman and CEO Ramon Laguarta[4].

The company is all set and on track to report its Q2 results and achieve the targets set for Fiscal Year 2022.

Volume increase and a strong price/mix are expected to boost the company’s second-quarter revenues. Pricing improvements in the quarter are projected as a consequence of strong realised prices across all segments. Revenue growth has been seen across all segments, and this is projected to continue in the second quarter.

Analyst expectations for second-quarter 2022 sales vary between 19.1 billion to 20.20 billion Dollars, with an average estimate of 19.5 billion Dollars. Earnings per share for the second quarter of 2022 vary from 1.64 to 1.80, with an average expectation of 1.74.

Source: money.cnn

#PEPSI Stock Analysis

Since dropping below 155 in June 2022, the price of #PEPSI has significantly recovered. At the time of writing, the price is trading at 171.82.

On the H4 time frame, the price is above the 20-moving average, and there has been no lower low close below the 20-MA. Formations of a higher high with a retracement of less than 38% and a demand trend line are indicators of near-term demand.

The resistance for the #PEPSI lies around 173. If it crosses this level, then the stock can go towards the 176.30.

On the flip side, the stock’s support lies around 166.92. If the price breaches this level, it can further dip towards 163.85.

PEP price chart

  1. https://www.nasdaq.com/articles/pepsico-earnings-preview%3A-heres-what-to-watch-for-2021-07-06
  2. https://www.cnbc.com/2022/04/26/pepsico-pep-q1-2022-earnings-beat-estimates.html#:~:text=The%20food%20and%20beverage%20giant,by%2014 %20cents%20per%20share.
  3. https://vigourtimes.com/pepsico-pep-q1-2022-earnings-beat-estimates/

4 https://www.sec.gov/Archives/edgar/data/0000077476/000007747622000021/q120228-kxexhibit991.htm

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Adnan Rehman

Market Analyst

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