Key takeaways:
· Performance in line with expectations, with broad based growth
· 2020 guidance slightly below consensus but most likely conservative
· CAGNY conference (major consumer staples companies attending) is next week, where new products are usually presented
Current price: $146 Price target: $153 (NEW)
Position size: 2.32% 1-year performance: +28%
Pepsi released their 4Q19 earnings results this morning: +4.3% organic sales was above consensus of 3.9% and EPS of $1.45 was roughly in line with consensus of $1.44. As shown below, growth was broad based across segments and regions. The productivity initiatives made by CEO Ramon Laguarta seems to be working, and should sustain the 7% EPS growth targeted for 2020. The company continues to invest in its manufacturing, procurement and marketing. As discussed on the call, smaller packaging continue to have traction with consumers. To summarize an uneventful quarter, results were a reflection of the steady performance we can expect from Pepsi.
Segment details:
2020 guidance:
Organic growth of 4%
EPS of $5.88 (+6%) below consensus of $5.95
Tag: PEP
category: earnings
$PEP.US
Thesis on Pepsi:
- Global growth opportunity with about 40% of profits coming from outside the US. CSD is only 25% of sales (and Pepsi brand only 12%)
- Strong market share in high growth emerging markets where there is low penetration and rising per capita consumption
- Resilient snack business provides pricing power and visibility to future cash flows (more than half of sales are from snacks not beverages). CSD is only 25% of sales (and Pepsi brand only 12%)
- Several Great brands driving global growth: Frito Lay, Quaker, Gatorade
- Strong balance sheet and cash flows support a solid dividend yield and share buyback program
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109