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Market Update

Earnings on Tap: PepsiCo

PepsiCo has an impressive record of creating or acquiring products aligned with emerging consumer trends, and future growth will be supplemented through select acquisitions.


 PepsiCo (PEP) is set to unveil fourth-quarter numbers before markets open Thursday. Earnings are expected to come in higher at $1.05 per share compared with $0.90 per diluted share in the corresponding quarter of the previous year.

In the third quarter, the beverage and snack company reported better-than-expected earnings on account of higher prices and lower interest expenses. For the period, the company reported an earnings per share of $1.21 and reaffirmed its 2012 full-year net revenue and earnings forecast.

PepsiCo said it expects to return more than $6 billion to shareholders through dividends and share repurchases in 2012.

According to Morningstar analyst Thomas Mullarkey, PepsiCo has built a wide economic moat as a result of its economies of scale, dominance in the snack category, and efficient distribution network. Additionally, the firm has an impressive record of creating or acquiring products that are aligned with emerging consumer trends.

Going forward, growth in the company's health and wellness segment will primarily be organic, but it will be supplemented through select acquisitions, writes Mullarkey. 

The stock, which is up 5.5% on year-to-date basis, is presently trading around Morningstar's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.