PepsiCo Beats Q3 Estimates: What Investors Need To Know

Beverage and snack giant PepsiCo, Inc. PEP reported third-quarter results that came in better than expected.

Pepsi Earnings Recap: PepsiCo said it earned $1.66 per share in the third quarter on revenue of $18.09 billion against Street expectations of $1.49 per share and revenue of $17.23 billion.

Revenue was up 5.3% year-over-year, while organic revenue was 4.2% higher, partly due to the ongoing strength of the company's global snacks and food business and a "significant improvement" in the beverage segment, according to Pepsi. 

The recent momentum prompted management to guide to approximately 4% organic revenue growth for the full year and EPS of $5.50 versus $5.53 last year.

The company also expects cash from operating activities of $10 billion; free cash flow of $6 billion; and net capital spending of around $4 billion.

Pepsi's CFO On The Q3 Print: PepsiCo's strong performance in the quarter can be attributed to consumers returning to "big brands in a pretty substantive way," PepsiCo CFO Hugh Johnston said on CNBC's "Squawk Box."

This is due to consumers adapting their habits toward PepsiCo's products during the pandemic, he said. 

PepsiCo's guidance assumes a sales growth rate that is in-line with pre-COVID-19 levels and is based on management's clear visibility into the fourth quarter, the CFO said.

Most notably, recent shifts in consumer habits across snacks and beverages have become stable, Johnston said. 

"We feel like we have good momentum in the business right now." 

Early Pepsi Analyst Reaction: PepsiCo showed strong sales in the quarter, and this should give investors confidence into the fourth quarter and next year, BofA Securities analyst Bryan Spillane said in a note.

Pepsi's full-year guidance implies fourth-quarter EPS of $1.45, which is in-line with consensus estimates, while free cash flow of $6 billion is unchanged from the guidance issued in early 2020, the analyst said. 

PepsiCo remains well positioned to perform well in a slowing economy and management remains committed to returning cash to shareholders despite the ongoing COVID-19 pandemic, he said. 

Spillane maintained a Buy rating on PepsiCo with an unchanged $150 price target.

PEP Price Action: Pepsi shares were trading 0.87% higher at $139.80 at last check Thursday. 

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