PepsiCo Earnings: Margins SUFFER for Five Quarters Straight, Profit Drops

S&P 500 (NYSE:SPY) component PepsiCo Inc. (NYSE:PEP) reported its results for the second quarter. PepsiCo is a global company that manufactures a variety of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages, and foods.

Investing Insights: Is TV the Next Bullish Catalyst for Apple’s Stock?

PepsiCo Inc. Earnings Cheat Sheet

Results: Net income for the beverages-soft fell to $1.49 billion (94 cents per share) vs. $1.89 billion ($1.17 per share) a year earlier. This is a decline of 21.1% from the year-earlier quarter.

Revenue: Fell 2.2% to $16.46 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: PepsiCo Inc. fell short of the mean analyst estimate of $1.09 per share. Analysts were expecting revenue of $16.66 billion.

Quoting Management: “PepsiCo is diligently executing the strategy we set forth at the start of the year, and we remain on track to achieve our full-year targets,” said PepsiCo Chairman and CEO Indra Nooyi. “We were able to achieve significant pricing in the second quarter, reflecting the strength of our brand portfolio and the success of our packaging initiatives. Our disciplined approach to pricing and continued focus on brand investment drove five percent organic net revenue growth and allowed us to substantially offset approximately $350 million in commodity cost inflation.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 0.8 percentage point to 51.9% from the year-earlier quarter. In that span, margins have contracted an average of 1.9 percentage points per quarter on a year-over-year basis.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the second quarter of the last fiscal year, which saw revenue rise 13.7%.

The company has now seen net income fall in each of the last two quarters. In the first quarter, net income fell 1.4% from the year-earlier quarter.

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by 2 cents, and in the fourth quarter of the last fiscal year, it was ahead by 2 cents.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the third quarter is $1.20 per share, down from $1.22 ninety days ago. For the fiscal year, the average estimate has moved down from $4.10 a share to $4.06 over the last sixty days.

Stocks with improving earnings metrics are worthy of your extra attention. In fact, “E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our CHEAT SHEET investing framework for this very reason. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

Don’t Miss These Additional Hot Stories:

Here’s The Top 10 Companies DOMINATING Web Traffic This Summer>>

SILVER: A Metal of Sunken Treasure and Champions>>

Is Cisco Systems Stock a BUY or SELL?