PepsiCo Beats Q3 Top and Bottom Line Estimates

PepsiCo Inc. (PEP) is trading higher by more than 1% in Tuesday’s pre-market after beating Q3 2021 top and bottom line estimates. The snack and beverage giant posted a profit of $1.79 per-share during the quarter, $0.06 better than expectations, while revenue rose 11.6% year-over-year to $20.19 billion, $800 million higher than consensus. The company reaffirmed 2021 guidance, expecting earnings-per-share (EPS) of at least $6.20 and 8% organic revenue growth.

Managing Inflation and Supply Constraints

The positive results eased Wall Street concerns that PepsiCo would warn about rising inflation and supply chain issues after recent warnings from Keurig Dr. Pepper Inc. (KDP) and McCormick and Co. Inc. (MKC). PEP has now missed earnings estimates just twice in the last twenty quarters, highlighting steady growth that’s lifted its long-term performance to the top of the dividend-paying food and beverage sector. The stock currently trades near 24 times forward earnings.

The company announced “strategic end-to-end transformation to drive sustainable long-term value and competitive advantage” in September, outlining environmentally-friendly programs to maintain growth in a more challenging decade. New Positive Choices green initiatives include “leveraging the scale and reach of its global brands to drive positive impact at scale and evolving its portfolio into spaces that are better for the planet and people, including plant-based proteins, nuts & seeds and whole grains”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 10 ‘Buy’, 2 ‘Overweight’, 10 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $140 to a Street-high $185 while the stock is set to open Tuesday’s session about $15 below the median $167 target. A rally above August’s all-time high at 159.63 is possible with this modest placement.

PepsiCo topped out at 146.74 in February 2020 and sold off to a two-year low during March’s pandemic decline. It finally completed a 100% retracement into the prior peak in November, yielding a downturn and higher March 2021 low. The rally back to resistance in April completed a cup and handle pattern, ahead of a July breakout that tagged the 160 level. The pullback since that time is testing new support while weekly oversold readings could support renewed upside.

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Disclosure: the author held PepsiCo in a family account at the time of publication.