PepsiCo’s business momentum continued in its second quarter 2022 as it delivered 13 per cent year-over-year organic revenue growth. This compares to 12.8 per cent growth in last year’s second quarter. The increase reflected both volume growth and price-mix realization.
PepsiCo earnings keep popping
PepsiCo Inc. (NASDAQ—PEP) is a leading global beverage and convenient food company with a complementary portfolio of brands, including Lays, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and Sodastream. The company serves customers and consumers in more than 200 countries and territories.
For the second quarter ended June 11, 2022, PepsiCo generated $2.6 billion (all figures in U.S. dollars) in adjusted revenue, or $1.86 a share, compared with $2.4 billion, or $1.72 a share, in the same period of 2021. (Note that reported earnings declined year over year due to a number of non-recurring items including charges related to the Russia-Ukraine conflict.)
Core gross profit increased a modest four per cent and the core gross margin declined 45 basis points due to the ongoing impact of inflationary pressures. Core operating profit increased eight per cent and reflected inflationary pressures on operating expenses, partially offset by ongoing cost management initiatives.
More gains from one of the kings of pop
Earlier this year, PepsiCo increased its annual dividend seven per cent to $4.60 a share.
In light of its second-quarter results, PepsiCo now expects organic revenue growth of 10 per cent for 2022, up from previous guidance of eight per cent. The company also projects constant currency earnings-per-share growth of eight per cent. Management expects the North American beverages and convenient food businesses to remain resilient and perform well, while the international markets should remain strong.
The shares trade for a high 25.2 times this year’s forecast earnings of $6.67 a share. This could limit capital appreciation over a three-to-five-year time frame but the stock’s dividend yield of 2.7 per cent may appeal to more income-oriented investors.
PepsiCo is a buy for long-term growth and some income.
This is an edited version of an article that was originally published for subscribers in the July 29, 2022 issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.
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The Investment Reporter •9/20/22 •