The first half of the year sizzled for the beverage space as two cola as well as food bellwethers – Coca Cola Co. (KO) and PepsiCo (PEP) – quenched investors’ thirst with better-than-expected earnings. However, the scenario changed as Coca Cola disappointed investors in Q3 though PepsiCo managed to maintain its winning trend.
KO Earnings Disappointment
The company’s adjusted earnings of $0.53 per share beat the Zacks Consensus Estimate by just a penny. A stronger dollar curtailed earnings growth by 6%. On a constant currency basis, earnings grew 6% mainly aided by cost containment efforts.
Net revenue was flat at $11.98 billion due to headwinds from currency and structural changes. Revenues fell shy of the Zacks Consensus Estimate of $12.14 billion on lower pricing and volume. However, constant currency revenues nudged up 1% in the quarter.
In North America, both still and sparkling beverages declined 1% in the quarter. Notably, a sluggish trend in carbonated beverages in the wake of rising health consciousness has been a dampener for cola giants in recent times.
This is not the end, though as guidance came as the real blow in the story. Though the company refrained from forecasting specific revenue or earnings figures, it expects 2014 earnings per share growth rate to be below the long-term range of a high single-digit increase.
Quite expectedly, after such downbeat guidance, Coca Cola traded in the red following the release of earnings on October 21 before the market opened. Shares were down about 6% in the key trading session.
PEP Earnings Impress
On October 9, PepsiCo beat the Zacks Consensus Estimate for both earnings and revenues on stronger developing and emerging market performance and increased pricing. Not only this, but the food and beverage behemoth enhanced its 2014 earnings guidance for the second time this year.
Pepsi’s third-quarter 2014 core earnings per share of $1.36 easily surpassed the Zacks Consensus Estimate of $1.29 by 5.4% and year-ago earnings by 10% helped by higher organic revenues and improved margins.
Total sales of $17.22 billion, up 2% year over year, beat the Zacks Consensus Estimate of $17.10 billion.
Stronger snacks performance and improvement in developing markets were behind PepsiCo’s strength. Pepsi now expects core constant currency earnings per share to increase 9% year over year, up from 8% expected earlier.
Although the PepsiCo stock went up 1.2% following the earnings release, the shares are trading flat since October 9.