PepsiCo Shares Fall After Q4 Report As Traders Stay Focused On Riskier Assets

PepsiCo Video 11.02.21.

Stay-At-Home Trend Boosts Revenue

Shares of PepsiCo are losing ground today after the release of the company’s quarterly report. In the fourth quarter, PepsiCo generated revenue of $22.46 billion and GAAP earnings of $1.33 per share, beating analyst estimates on revenue and missing them on earnings. On an adjusted basis, PepsiCo reported earnings of $1.47 per share, beating analyst estimates by just $0.01.

The company’s revenue was boosted by the pandemic as people consumed snacks and beverages while staying at home during lockdowns or remote work. In the fourth quarter, unit volume grew for both food and beverages segments.  PepsiCo expects that this trend will be continued in 2021 and predicts that its revenue will continue to grow.

PepsiCo also announced a 5% increase in its annualized dividend starting with the June 2021 dividend payment which is welcome news for income-oriented investors. At current price levels, the stock yields about 3% which is not sufficient enough to attract aggressive yield hunters but is a decent yield in the low-rate world.

What’s Next For PepsiCo?

PepsiCo’s shares had a challenging start of the year and are down by more than 7% year-to-date. Just like many stocks in the current market environment, PepsiCo is rather richly valued and trades at about 25 forward P/E. This is a pricey valuation for an established company which is unlikely to experience strong growth.

For 2021, PepsiCo expects to report a mid-single digit increase in organic revenue and a high-single digit increase in core constant currency earnings per share. The company stated that it has recently completed its share buyback program and that it did not expect to repurchase more shares in 2021, focusing exclusively on the dividend.

In this light, demand for PepsiCo’s shares will depend on demand for safer-haven assets. If S&P 500 faces more resistance, demand for defensive assets like PepsiCo shares may grow, providing support to the stock.

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