PepsiCo (PEP) closed the first quarter of fiscal 2018 with a core net profit of $96 cents per share, a 3% increase on a year-over-year basis, beating consensus by 3 cents. The beat produced a 3.2% surprise.
However, the market was not particularly impressed by first quarter results. Following the release, the stock in PepsiCo closed 1.5% down to $101.71 on Friday at the end of regular hours trading.
First-quarter net earnings were backed on revenue of $12.562, a 4.2% increase compared to the same quarter of fiscal 2017. PepsiCo beat analysts’ expectations on first quarter 2018 revenue by $160 million.
PepsiCo also reported a growth of 2.3% in first-quarter organic revenue and topped consensus. Analysts were for a 1.7% growth.
First quarter 2018 net revenues were shared among the following products and segments and compared to the same quarter of 2017: Sales of Frito-Lay North America went up 3% to $3.617 billion. Sales of Quaker Foods North America was flat at $601 million.
Sales in the Latin America segment were $1.224 billion, a 14% increase on a year-over-year basis. Sales of North America Beverages segment went down 1% from the comparable of 2017 to $4.42 billion; sales in Europe Sub-Saharan Africa segment increased to $1.67 billion at a 15% year-over-year growth rate. Sales of the AMEA segment increased by 7% year- over-year to $1.04 billion in the first quarter of 2018.
The chart below illustrates the trends in PepsiCo’s total first quarter net revenues over the last five reporting periods:
The company provided its shareholders with the guidance for full fiscal 2018: PepsiCo predicts that organic revenue growth will be on par with 2017 growth. The core net profit is forecasted to be $5.70 per share and the net capex to approximate the amount of $3.6 billion. The operating cash flow is expected to be about $9 billion and the free cash flow is anticipated at $6 billion.
Besides business growth purposes, the free cash flow will be used by PepsiCo for dividend payment. The company is currently distributing a cash quarterly dividend of $80.5 per ordinary share to the holders of common stock in PepsiCo. Forward dividend and yield is $3.22 per share and 2.95%.
The company closed the first quarter of fiscal 2018 with $20.61 billion cash on hand and securities. This amount of cash plus the free cash flow that PepsiCo’s operations will generate in 2018 will provide the U.S. global food, snack and beverage corporation with the necessary liquidity to finance the replacement of a $12 billion buyback program with a new one for up to $15 billion. PepsiCo will start to repurchase its own shares under the new program this year on July 1. The company expects to spend approximately $2 billion for the repurchase of its own shares by the end of 2018.
The company has a market capitalization of $144.37 billion, a price-book ratio of 13.1 times versus an industry median of 2.56, a price-sales ratio of 2.25 times versus an industry median of 1.36 times and a price-earnings ratio of 29.54 times versus an industry average of 23.36 times.
So far this year, PepsiCo (PEP, Financial) has fallen 14% and the current share price is slightly off the 52-week low of $100.85 per share. While the 52-week high is $122.51 per share.
The recommendation rating is 2.3 out of 5 and the average target price is $123.19 per share.
(Disclosure: I have no positions in any stock mentioned in this article.)
