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PepsiCo Stock Rises as Key Metric Forecast Tops EstimatesPepsiCo Stock Rises as Key Metric Forecast Tops EstimatesBarron's (Online); New York PepsiCo stock was popping on Wednesday after the food and beverage giant posted better-than-expected third-quarter results and raised its outlook for fiscal 2022. PepsiCo (ticker: PEP) reported third-quarter adjusted earnings of $1.97 a share, topping analysts' estimates for $1.84 a share. Revenue came in at $21.9 billion, above forecasts for $20.8 billion. In the year-ago quarter, earnings per share clocked in at $1.79, while revenue was $20.2 billion. Organic revenue growth—a key metric for consumer staples like Pepsi—was 16% in the quarter. The company said it expected organic revenue in the fiscal year to rise 12%, higher than its prior estimate of up 10% and higher than Wall Street forecasts. Core constant-currency earnings per share will increase 10%, management said, up from previous projections for 8% growth. On a non-constant-currency basis, earnings per share will rise about 7.5% to $6.73 for fiscal 2022. Shares of Pepsi were up 3.6%, at $168.44, in recent trading, while the S&P 500 was up 0.3%. The stock is down 3% this year, outperforming the S&P's 25% decline. Pepsi could be an exception amid an earnings season that is expected to be a downbeat one. The company saw significant growth during the pandemic as shoppers feasted on more snacks . That trend has extended into the reopening period, even as rising inflation has prompted many consumers to pull back spending. And indeed, food seemed to be leading the way for Pepsi this quarter. Pepsi's Frito-Lay unit saw organic revenue grow by 20% in North America and by 22% in Latin America. "All indications are that momentum continues in consumables as consumers reallocate spending from durables/discretionary," wrote J.P. Morgan analyst Andrea Teixeira in a research note ahead of the earnings. PepsiCo has long been one of the Street's most dependable performers . The company has missed consensus only once in the past decade, wrote CFRA analyst Garrett Nelson. This quarter's strong performance was largely driven by Pepsi's continued pricing power, he added, demonstrating the brand's strength in an inflationary environment. Nelson raised his rating to Strong Buy from Buy following Pepsi's results. "The investment we've made in the brands in the last few years are paying off in the sense that our brands are being stretched to higher price points and consumers are following it," said PepsiCo CEO Ramon Laguarta in a call with investors. Of course, even Pepsi isn't immune from the macroeconomic challenges facing the economy. Gross margins contracted by about 20 basis points, or 0.2 percentage point, management said. The company is also modeling for foreign-exchange headwinds to negatively impact net revenue and core earnings-per-share performance by about 2.5 percentage points, up from projections for two percentage points. |
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