Coca-Cola Hits All-Time High

Dow component Coca-Cola Co. (KO) posted an all-time high on Tuesday, adding to two-month gains of nearly 20%. That’s quite an uptick for the normally slow mover, highlighting a broad rotation out of growth stocks and into safe havens that can, theoretically at least, withstand rising inflation.  Price action has now cleared stubborn resistance at the February 2020 peak after a pandemic-driven revenue shock, driven by empty stadiums, movie theaters, and theme parks.

Pricing Power Play

Shareholders hope the beverage giant will play catch-up with rival PepsiCo Inc. (PEP), which cleared a similar barrier during in the summer of 2021. Coke needs favorable economics and a reliable distribution network to prosper because it hasn’t diversified into non-beverage products, unlike PEP’s wide variety of snack foods. Management hasn’t helped this cause over the years, building a well-earned reputation for extreme risk avoidance.

UBS analyst Sean King pounded the tables on Tuesday, wondering if Coca-Cola is the “pricing power play of 2022”. As he notes “We believe KO checks the boxes for the key drivers of pricing power in CPG: a) market share leadership, b) category/manufacturer concentration, c) limited exposure to private label, and d) a history of rational pricing competition. We believe KO’s unique pricing & franchise model could enable it to realize a greater increase in profit per concentrate gallon than the fully burdened increase in costs associated with selling that gallon”.

Wall Street and Technical Outlook

Wall Street consensus stands at a positive ‘Overweight’ rating based upon 15 ‘Buy’, 4 ‘Overweight’, 9 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $58 to a Street-high $71 while the stock is set to open Wednesday’s session about $2 below the median $64 target. This modest placement predicts slow but meaningful upside in coming months, in line with the stock’s low volatility reputation.

Coca-Cola roared in the 1990s, topping out at 44.47 in 1998. It finally returned to that resistance level 16 years later, entering a test that continued through 2020’s pandemic decline. The stock bottomed out in the 30s at that time and turned sharply higher, stair-stepping into the prior peak at the start of 2022. A six-week consolidation has now given way to higher prices, setting the stage for a rally into the upper 60s. The company currently pays a 2.71% annual dividend yield.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held Coca-Cola and PepsiCo in family accounts at the time of publication.

Wall Street Week Ahead Earnings: KKR, Walt Disney, Coca-Cola, Twitter and PepsiCo in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 7

Monday (February 7)

TICKER COMPANY EPS FORECAST
ACM AECOM $0.77
CHGG Chegg $0.13
HAS Hasbro $0.85
LEG Leggett & Platt $0.73
ON ON Semiconductor $0.94
THC Tenet Healthcare $1.49
TSN Tyson Foods $2.01

 

Tuesday (February 8)

IN THE SPOTLIGHT: KKR

The U.S.-based investment firm KKR & Co is expected to report its fourth-quarter earnings of $1.02 per share, which represents year-over-year growth of over 108% from $0.49 per share seen in the same period a year ago.

The company that manages multiple alternative asset classes would post revenue growth of 17% to $784.8 million. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Strong near-term growth with fundraising supercycle and GA accretion coming into earnings, but we see this reflected in the price at the current valuation for a business model with greater earnings contribution from the balance sheet (40%). While strong investment performance could drive upward estimate revisions, we have less visibility on more episodic investment income gains,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Mgmt’s increased focus on expanding the platform with adjacent strategies and scaling successor funds should drive higher fee-related earnings (FRE).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 8

TICKER COMPANY EPS FORECAST
BP BP $1.18
IT Gartner $2.47
HOG Harley-Davidson $-0.37
LYFT Lyft $-0.46
PFE Pfizer $0.85

 

Wednesday (February 9)

IN THE SPOTLIGHT: WALT DISNEY

Walt Disney, a family entertainment company, is expected to report its fiscal first-quarter earnings of $0.68 per share, which represents year-over-year growth of over 112% from $0.32 per share seen in the same period a year ago.

The family entertainment company would post revenue growth of over 30% to $21.15 billion. The company has beaten earnings estimates in most of the quarters in the last two years, at least.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 9

TICKER COMPANY EPS FORECAST
AFG American Financial Group $2.98
CVS CVS Health $1.56
HMC Honda Motor $0.95
RDWR Radware $0.13
SGEN Seagen $-0.74
TM Toyota Motor $3.76
UBER Uber Technologies $-0.33

 

Thursday (February 10)

IN THE SPOTLIGHT: COCA-COLA, TWITTER, PEPSICO

COCA-COLA: The world’s largest soft drink manufacturer is expected to report its fourth-quarter earnings of $0.41 per share, which represents a year-over-year decline of over 12% from $0.47 per share seen in the same quarter a year ago. However, the company’s revenue would grow nearly 4% to $8.94 billion.

TWITTER: The social media giant is expected to report its fourth-quarter earnings of $0.35 per share, which represents year-over-year growth of about 8% from $0.38 per share seen in the same period a year ago.

The company would post revenue growth of over 21% to $1.57 billion. Twitter expects revenues of approximately $1.5 billion to $1.6 billion in the fourth quarter of 2021. GAAP operating income is expected to range from $130 million to $180 million, according to ZACKS Research.

With a focus on engineering and products, Twitter expects to increase headcount and costs by 30% or more in 2021. In 2021, the company expects total revenues to grow faster than expenses.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for Twitter (TWTR) given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its fourth-quarter earnings of $1.52 per share, which represents year-over-year growth of over 3% from $1.47 per share seen in the same period a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 9% to $24.35 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company revised its organic revenue growth to 8% from 6% previously. The company estimates core earnings of $6.20 per share for 2021, compared to $5.52 in 2020, according to ZACKS Research.

PepsiCo struggles with supply-chain headwinds that have caused it to increase costs and limit its output. Investors will want to know whether the beverage company is winning this battle when it reports its financial results for the fourth quarter of 2021 on Thursday, February 10.

“For the quarter, we are expecting PepsiCo (PEP) to deliver EPS of $1.47, which implies flat YoY growth and is 4 pennies below consensus EPS of $1.51. Our $1.47 4Q21 estimate implies FY21 EPS of $6.20, which is at the low end of management’s expectation to deliver “at least” $6.20 in EPS and may ultimately prove conservative given PepsiCo’s (PEP) history of outperforming expectations. Since 1Q18, we can see that PEP’s reported EPS has come in above consensus in 14 out of the past 15 quarters, with an average upside surprise of+5%,” noted Vivien Azer, equity analyst at Cowen.

“As we are already almost a month into the new year, all eyes will be on PepsiCo’s (PEP) initial FY22 guidance. As a reminder, on the last earnings call management noted that at the time they expected FY22 performance to be in line with its stated long-term targets, which means MSD (+4-6%) organic revenue growth and HSD core constant currency EPS growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 10

TICKER COMPANY EPS FORECAST
AZN AstraZeneca $0.78
EXPE Expedia Group $-0.01
GDDY GoDaddy $0.41
K Kellogg $0.8
MCO Moody’s $2.3
PEP PepsiCo $1.52
TWTR Twitter $0.16
WU Western Union $0.53

 

Friday (February 11)

TICKER COMPANY EPS FORECAST
APO Apollo Global Management $1.08
D Dominion Energy $0.93
FTS Fortis $0.58
MGA Magna International $0.81

 

Preview: What to Expect From PepsiCo’s Earnings Next Week

The Harrison, New York-based global food and beverage leader PepsiCo is expected to report its fourth-quarter earnings of $1.52 per share, which represents year-over-year growth of over 3% from $1.47 per share seen in the same period a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 9% to $24.35 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company revised its organic revenue growth to 8% from 6% previously. The company estimates core earnings of $6.20 per share for 2021, compared to $5.52 in 2020, according to ZACKS Research.

PepsiCo struggles with supply-chain headwinds that have caused it to increase costs and limit its output. Investors will want to know whether the beverage company is winning this battle when it reports its financial results for the fourth quarter of 2021 on Thursday, February 10.

PepsiCo stock traded 0.71% lower at $171.43 on Monday. The stock fell over 1.3% so far this year after surging over 17% in 2021.

Analyst Comments

“For the quarter, we are expecting PepsiCo (PEP) to deliver EPS of $1.47, which implies flat YoY growth and is 4 pennies below consensus EPS of $1.51. Our $1.47 4Q21 estimate implies FY21 EPS of $6.20, which is at the low end of management’s expectation to deliver “at least” $6.20 in EPS and may ultimately prove conservative given PepsiCo’s (PEP) history of outperforming expectations. Since 1Q18, we can see that PEP’s reported EPS has come in above consensus in 14 out of the past 15 quarters, with an average upside surprise of+5%,” noted Vivien Azer, equity analyst at Cowen.

“As we are already almost a month into the new year, all eyes will be on PepsiCo’s (PEP) initial FY22 guidance. As a reminder, on the last earnings call management noted that at the time they expected FY22 performance to be in line with its stated long-term targets, which means MSD (+4-6%) organic revenue growth and HSD core constant currency EPS growth.”

PepsiCo Stock Price Forecast

Six analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $177.83 with a high forecast of $195.00 and a low forecast of $165.00.

The average price target represents a 3.75% change from the last price of $171.40. Of those six analysts, two rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $172 with a high of $200 under a bull scenario and $114 under the worst-case scenario. The investment bank gave an “Overweight” rating on the beverage company’s stock.

“We are Overweight on PepsiCo (PEP). We believe Pepsi has sustainably accelerated organic sales growth with favourable execution changes (including reinvestment in marketing/cap-ex), a mix shift to the higher growth snacks business, improving share trends in beverages, and higher growth M&A contribution. This higher growth level is not fully factored into valuation, with Pepsi at an EV/EBITDA discount to large-cap peers,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Credit Suisse raised the target price to $166 from $157. Cowen and company lifted the target price to $200 from $185. Jefferies upped the target price to $180 from $162. Guggenheim increased the target price to $186 from $175.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Check out FX Empire’s earnings calendar

2 Stocks From This Defensive Sector Buck The Trend During Market Selloff

After Federal Reserve meeting minutes pointed to a faster-than-expected rise in U.S. interest rates, the 4 major U.S. indices – S&P 500 (SPX), Nasdaq Composite (IXIC), Dow Jones (DJI) and Russell 2000 (RUT) fell significantly. The volatility similar to the Black Friday’s selloff last year is back.

Despite the market selloff, there are still a few dozen stocks showed up in my screener, which is under beta testing. After further filtering based on the price structure and the relative strength, one defensive sector stands out because there are still quite a number of stocks such as Coca-Cola (KO), General Mills (GIS), Tyson Food (TSN), Pepsico (PEP), etc… in a strong up trend and outperform the S&P 500.

Visit TradePrecise.com to get additional market insights and test results from my stock screener in email for free.

The following 2 stocks are selected based on the price volume analysis and could still provide decent reward to risk ratio with a relatively low risk trade entry. Consumer staples is one of the well-known defensive sectors and these 2 stocks are under the Food Products industry group.

Hershey Foods (HSY) Price Volume Analysis

From the weekly chart as shown below, HSY has formed an accumulation range lasted 18 months from September 2019 until March 2021. After breakout from the accumulation structure, HSY had a steady rally and a shallow pullback from July-November 2021.

Since December, HSY broke above the resistance at 180 and continued to trend up despite the increasing volatility showed up in the broad market.

It can be observed that the volume within the accumulation structure has been decreasing, suggested that the supply is exhausted, which is a classical volume pattern based on the Wyckoff method. If you would like to find out more on the application of Wyckoff method, watch the YouTube video to find out how I derive the directional bias for the current market.

On the daily chart below, HSY is on a climatic run with the presence of supply, which could be vulnerable for a pullback. Should a reversal happen near the axis line at 192 where the resistance-turned-support, that could provide a decent entry by leaning on the support level at 192.

Flowers Foods (FLO) Price Volume Analysis

FLO has started an accumulation range from September 2020-2021 (refer to the chart below). After the breakout in October 2021 followed by a shallow pullback tested the resistance-turned-support area at 24.5, the markup phase started. So far, FLO is travelling within an up-channel, forming a higher high and a higher low.

It is worth noting the two volume spikes as highlighted in yellow because those two bars containing increasing of supply, which essentially stopped the short term up move. After the spike of volume in the first bar in mid of November, a pullback took place and tested the demand line of the channel.

After an even higher spike of volume in the second bar in mid of December on the breakout, the pullback is mild and shallow with decreasing volume, suggested the supply showed up on the breakout bar has been absorbed.

In the latest 2 bars, there are presence of supply as reflected in the increasing volume together with the rejection tail and the smaller price spread, which could be vulnerable for a pullback. Watch out for a pullback or consolidation before the next rally. A reversal entry or a breakout entry is viable while leaning the support at 27.5.

As the bias for the short term direction of the market is down plus the deterioration of the market breadth, it is essential to monitor how the price of HSY and FLO reacts and wait for a confirmation before execution.

PepsiCo Should Post Solid 2022 Returns

PepsiCo Inc. (PEP) won the cola wars a long time ago, outperforming Dow component Coca-Cola Co. (KO) by a country mile. Ten year returns tell the tale, with PEP gaining an impressive 166% prior to dividends while KO has added just 77%. The company has outpaced its rival by an even greater margin since March 2020, benefiting from broad diversification into snacks while KO’s beverage-heavy lineup suffered from half-empty stadiums, restaurants, and movie theaters.

Managing Inflation Headwinds

Rising inflation has challenged the bottom lines of both operations but PepsiCo’s strong management has implemented effective cost cutting and productivity gain initiatives that are expected to produce a $1 billion in annual savings through 2023, despite less income from restaurants, theaters, and stadiums. This proactive approach includes improvements to the company’s global management footprint and the reengineering of its distribution network.

Argus analyst John Staszak raised PEP’s price target to $195 on Tuesday, noting “at 24.9-times our revised 2022 EPS estimate, the shares are trading in line with their five-year historical average. We think that investors will continue to favor the shares given the company’s ability to raise its dividend and deliver strong growth. Our revised target price of $195 (up from $180), combined with the dividend, implies a total potential return of about 15% from current levels”.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Moderate Buy’ rating based upon 11 ‘Buy’, 1 ‘Overweight’, 9 ‘Hold’, 2 ‘Underweight’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $160 to a Street-high $195 while the stock is set to open Wednesday’s session about $3 above the median $173 target. Although this placement suggests PepsiCo is fairly valued at this time, the current rotation into dividend payers should benefit price action in the first quarter.

PepsiCo completed a breakout above the February 2020 peak at 147.20 in July 2021, entering a strong uptrend that stalled at a 7-year rising highs trendline in August. It cleared that resistance level in November and took off in another uptick about one month later, posting an all-time high at 174.45 on Tuesday. A pullback to new support near 165 should mark a low risk buying opportunity in this configuration, ahead of continued upside toward 200. The current 2.49% dividend yield makes this set-up even more attractive for longer-term strategies.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held PepsiCo and Coca-Cola in family accounts at the time of publication. 

JPMorgan’s Dimon Calls Bitcoin ‘Fool’s Gold’

The bulls are back in control of bitcoin, with the price crossing the $50,000 level once again. For the week, bitcoin has gained 20% as bitcoin’s market cap inches closer to the $1 trillion threshold once again. Despite bitcoin’s bull cycle, JPMorgan CEO Jamie Dimon can’t refrain from taking aim at the leading cryptocurrency.

Dimon’s Diss

Jamie Dimon in an interview with Axios slammed bitcoin for having “no intrinsic value,” saying “regulators are going to regulate the hell out of it.” He doesn’t expect that bitcoin will disappear, but he believes that there is a looming threat that it will be deemed illegal similar to the bitcoin bans that China has implemented. For that reason, he describes bitcoin as “a little bit of fool’s gold.”

The JPMorgan chief strongly believes that bitcoin should be regulated considering that one of its main use cases is as a payment method. Banks are regulated, and so should cryptocurrency, in his view. Dimon points to the use of bitcoin in nefarious activities such as “tax avoidance, sex trafficking and ransomware,” saying that it’s only a matter of time before the market is regulated.

This is not the first time that Dimon has criticized bitcoin. Back in 2017, he described bitcoin as a “fraud” and prohibited the firm’s traders from having any exposure to it. While he has since taken a more indifferent approach, having recently said he doesn’t care about bitcoin, he has also made it clear that he is not a fan of the biggest cryptocurrency, either.

Bitcoin Price

Dimon’s comments coincide with a bull run in the bitcoin market. Raoul Pal, head of Global Macro Investor, noted that the “on-chain analysis suggests a breakout” in the bitcoin price, though it’s hard to say whether it will “break out on its first attempt” or “correct again.”

Analyst PlanB believes that the bitcoin bull market is in the early stages, forecasting that it is “midway” and “will have at least six more months to go.” PlanB has a year-end price target on the bitcoin price of more than $100,000 based on his own bitcoin stock-to-flow model.

And while JPMorgan’s Dimon may not be a fan of bitcoin, PepsiCo CFO Hugh Johnston said on CNBC that it’s “awfully early” in the crypto game and he would “never say never” about adding bitcoin to the company’s balance sheet. Johnston added, however, that bitcoin is still too “volatile” and “speculative” to serve as a functional currency for PepsiCo now.

Pepsi Drinks Could See More Price Hikes In The First Quarter Of 2022

The prices of Pepsi drinks have been increasing in the past few months, and the company expects more price hikes in the first quarter of next year.

PepsiCo To Hike Prices In Q1 2022

PepsiCo CFO Hugh Johnston has revealed that he expects more price hikes for the company’s drinks in the first quarter of the next year. The company has been increasing the prices of its drinks over the past few years and intends to do so in the coming quarter.

Johnston told CNBC’s “Squawk Box” earlier today that he expects more pricing increase in the first quarter of 2022. He attributes the pricing hike to the rising input costs, which makes it more expensive for the company to manufacture its drinks.

He pointed out that Pepsi’s drinks recorded increased prices during the summer, but their snack prices are now experiencing similar price hikes. The situation is not unique to PepsiCo as other soft drink manufacturers, including Coca-Cola and Proctor & Gamble, have been hiking their prices in recent months. The price hikes were necessary to ensure that the rising input costs don’t affect the companies’ profits.

Similar to other food and beverage companies, PepsiCo purchases its commodities and materials months in advance. However, the rising inflation levels haven’t helped the company at all and have led to the rising cost of production.

Johnston stated that the forward buying could only do so much for the company. It only delays the eventual price hikes by a few months as they will have to adjust prices again if the inflation level keeps rising.

Peps
PEP stock chart. Source: FXEMPIRE

PEP Is Up By Less Than 1%

The shares of PepsiCo are up by less than 1% during Tuesday’s pre-market trading session. At the time of writing, PEP is up by 0.20%. PEP is trading at $150 per share, after closing Monday trading around the same level.

Year-to-date, PEP hasn’t performed excellently. It is up by only 3.76%, with the rising inflation affecting its current performance.

PepsiCo Beats Q3 Top and Bottom Line Estimates

PepsiCo Inc. (PEP) is trading higher by more than 1% in Tuesday’s pre-market after beating Q3 2021 top and bottom line estimates. The snack and beverage giant posted a profit of $1.79 per-share during the quarter, $0.06 better than expectations, while revenue rose 11.6% year-over-year to $20.19 billion, $800 million higher than consensus. The company reaffirmed 2021 guidance, expecting earnings-per-share (EPS) of at least $6.20 and 8% organic revenue growth.

Managing Inflation and Supply Constraints

The positive results eased Wall Street concerns that PepsiCo would warn about rising inflation and supply chain issues after recent warnings from Keurig Dr. Pepper Inc. (KDP) and McCormick and Co. Inc. (MKC). PEP has now missed earnings estimates just twice in the last twenty quarters, highlighting steady growth that’s lifted its long-term performance to the top of the dividend-paying food and beverage sector. The stock currently trades near 24 times forward earnings.

The company announced “strategic end-to-end transformation to drive sustainable long-term value and competitive advantage” in September, outlining environmentally-friendly programs to maintain growth in a more challenging decade. New Positive Choices green initiatives include “leveraging the scale and reach of its global brands to drive positive impact at scale and evolving its portfolio into spaces that are better for the planet and people, including plant-based proteins, nuts & seeds and whole grains”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 10 ‘Buy’, 2 ‘Overweight’, 10 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $140 to a Street-high $185 while the stock is set to open Tuesday’s session about $15 below the median $167 target. A rally above August’s all-time high at 159.63 is possible with this modest placement.

PepsiCo topped out at 146.74 in February 2020 and sold off to a two-year low during March’s pandemic decline. It finally completed a 100% retracement into the prior peak in November, yielding a downturn and higher March 2021 low. The rally back to resistance in April completed a cup and handle pattern, ahead of a July breakout that tagged the 160 level. The pullback since that time is testing new support while weekly oversold readings could support renewed upside.

For a look at today’s economic events, check out our economic calendar.

Disclosure: the author held PepsiCo in a family account at the time of publication. 

Earnings Week Ahead: PepsiCo, Acuity Brands and Constellation Brands in Focus

Earnings Calendar For The Week Of October 4

Monday (October 4)

No major earnings are scheduled for release.

Tuesday (October 5)

IN THE SPOTLIGHT: PEPSICO

The Harrison, New York-based global food and beverage leader PepsiCo is expected to report its third-quarter earnings of $1.72 per share, which represents year-over-year growth of about 4% from $1.66 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 7% to $19.3 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of over 8%.

“We expect another PepsiCo (PEP) EPS beat in Q3, and another quarter of strong organic sales growth confirming higher LT topline growth after Pepsi’s reinvestment in marketing/cap-ex in recent years. Valuation still looks compelling with Pepsi at only a ~3% CY23 EV/EBITDA premium to lower growth food peers,” noted Dara Mohsenian, Equity Analyst at Morgan Stanley.

“We are increasingly confident in a sustained pickup in organic sales growth at PepsiCo (PEP) longer-term, driven by favourable strategic changes under a relatively new CEO (Ramon Laguarta), including higher reinvestment in the business in marketing/cap-ex, PEP’s mix shift to the higher growth/ higher margin snacks category (representing ~2/3 of PEP’s profit), as well as improving topline trends in beverages post COVID, due to a category rebound and sequentially improving PEP market share performance. As shown below, PEP 2-Yr average organic sales growth accelerated during Laguarta’s tenure from 3% in 2017 and 2018 pre his arrival steadily to 4.1% in 2019 and 4.4% in 2020 post strategy changes, and further to 5.8% in H1 of 2021.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 5

Ticker Company EPS Forecast
PEP PepsiCo $1.73

Wednesday (October 6)

IN THE SPOTLIGHT: CONSTELLATION BRANDS, ACUITY BRANDS

CONSTELLATION BRANDS: The New York-based Fortune 500 international beverage alcohol company is expected to report its fiscal second-quarter earnings of $2.78 per share, which represents year-over-year growth of about 1% from $2.76 per share seen in the same quarter a year ago. The corona beer marker’s revenue is predicted to rise nearly 4% to around $2.34 billion.

“We rate Constellation Brands (STZ) Overweight. Valuation in our minds does not reflect STZ’s strong LT topline growth outlook with the beer segment returning to HSD% depletion growth in FY22 and beyond, an improved wine/spirits outlook post the low-end divestiture, and a return to share repurchases,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

ACUITY BRANDS: The lighting and building management firm is expected to report its fiscal fourth-quarter earnings of $2.88 per share, which represents year-over-year growth of over 22%, up from $2.35 per share seen in the same period a year ago.

The Atlanta, Georgia-based company would post year-over-year revenue growth of nearly 10% to around $975 million.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 6

Ticker Company EPS Forecast
TSCO Tesco £6.25
STZ Constellation Brands $2.78
RPM RPM International $1.04
AYI Acuity Brands $2.88
LW Lamb Weston Holdings Inc $0.39
AONNY Aeon ADR -$0.02

Thursday (October 7)

Ticker Company EPS Forecast
CAG Conagra Foods $0.48
HELE Helen Of Troy $2.24

Friday (October 8)

No major earnings are scheduled for release.

PepsiCo On Track To Beat Earnings Estimates Again; Stock Has Over 10% Upside Potential

The Harrison, New York-based global food and beverage leader PepsiCo is expected to report its third-quarter earnings of $1.72 per share, which represents year-over-year growth of about 4% from $1.66 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 7% to $19.3 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of over 8%.

“Analysts expect that PepsiCo will report full-year earnings of $6.05 per share for the current fiscal year, with EPS estimates ranging from $5.91 to $6.13. For the next year, analysts expect that the firm will post earnings of $6.54 per share, with EPS estimates ranging from $6.34 to $6.77,” noted analysts at ZACKS Research.

PepsiCo shares have only risen over 1% so far this year.

Analyst Comments

“We expect another PepsiCo (PEP) EPS beat in Q3, and another quarter of strong organic sales growth confirming higher LT topline growth after Pepsi’s reinvestment in marketing/cap-ex in recent years. Valuation still looks compelling with Pepsi at only a ~3% CY23 EV/EBITDA premium to lower growth food peers,” noted Dara Mohsenian, Equity Analyst at Morgan Stanley.

“We are increasingly confident in a sustained pickup in organic sales growth at PepsiCo (PEP) longer-term, driven by favourable strategic changes under a relatively new CEO (Ramon Laguarta), including higher reinvestment in the business in marketing/cap-ex, PEP’s mix shift to the higher growth/ higher margin snacks category (representing ~2/3 of PEP’s profit), as well as improving topline trends in beverages post COVID, due to a category rebound and sequentially improving PEP market share performance. As shown below, PEP 2-Yr average organic sales growth accelerated during Laguarta’s tenure from 3% in 2017 and 2018 pre his arrival steadily to 4.1% in 2019 and 4.4% in 2020 post strategy changes, and further to 5.8% in H1 of 2021.”

PepsiCo Stock Price Forecast

Thirteen analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $166.08 with a high forecast of $185.00 and a low forecast of $155.00.

The average price target represents a 10.42% change from the last price of $150.41. From those 13 analysts, seven rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $172 with a high of $200 under a bull scenario and $114 under the worst-case scenario. The firm gave an “Overweight” rating on the beverage company’s stock.

Several other analysts have also updated their stock outlook. Deutsche Bank raised the target price to $158 from $154. Guggenheim lifted the target price to $175 from $171. UBS upped the target price to $170 from $168.

Check out FX Empire’s earnings calendar

PepsiCo to Sell Tropicana, Other Juice Brands For $3.3 Billion

The company, which bought the orange juice maker in 1998 for roughly $3.3 billion and U.S.-based Naked Juice nearly a decade later for $150 million, will keep a 39% stake in the new joint venture and have exclusive U.S. distribution rights for the brands.

The sale will give PepsiCo the funds to develop and grow its portfolio of health-focused snacks and zero-calorie beverages, Chief Executive Officer Ramon Laguarta said, as the company focuses on more profitable brands.

Rival Coca-Cola Co has also been streamlining its product range over the past year, discontinuing its TaB diet soda and Coca-Cola Energy brands in the United States and selling its ZICO coconut water brand.

“Companies are finding it difficult to provide effective marketing support behind an infinite number of brands that often compete for very similar occasions,” Rabobank Food and Beverage analyst Stephen Rannekleiv said in May.

He added that companies are looking to launch new products that have been developed in-house.

The juice businesses made about $3 billion in net revenue in 2020 for PepsiCo, with operating profit margins that were below the group’s.

The deal is one of the many food and beverage investments PAI has made over the last few years. In 2019, Nestle SA sold its U.S. ice cream business, including brands such as Häagen-Dazs, to a joint venture backed by PAI in deal valued at $4 billion.

Centerview Partners is the financial advisor to PepsiCo on the deal, while J.P. Morgan Securities LLC is advising PAI.

(Reporting by Uday Sampath in Bengaluru; Editing by Patrick Graham and Arun Koyyur)

S&P 500 and Nasdaq End Down After Hitting Record Highs

The S&P 500 and Nasdaq reached fresh record highs but quickly fell into negative territory after an auction of 30-year Treasuries showed less demand than some investors expected and pushed yields higher.

Data indicated U.S. consumer prices rose by the most in 13 years last month, while so-called core consumer prices surged 4.5% year over year, the largest rise since November 1991.

Economists viewed the price surge, driven by travel-rated services and used automobiles, as mostly temporary, aligning with Federal Reserve Chair Jerome Powell’s long-standing views.

“Any time you get an uptick in interest rates the stock market is going to get nervous, especially on a day like today,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

The S&P 500 growth index dipped 0.05%, while the value index fell 0.70%.

“With growth outperforming value, the takeaway is clearly that inflation from a market perspective is not a real threat in the long term,” said Keith Buchanan, a portfolio manager at GLOBALT Investments in Atlanta, Georgia.

Ten of the 11 major S&P 500 sector indexes ended lower, with real estate, consumer discretionary and financials each down more than 1%.

JPMorgan Chase & Co stock fell 1.5% after the company reported blockbuster quarterly profit growth but warned that the sunny outlook would not make for blockbuster revenues in the short term due to low interest rates.

Goldman Sachs Group Inc dipped 1.2% after its quarterly earnings exceeded forecasts.

Citigroup, Wells Fargo & Co and Bank of America were due to report their quarterly results early on Wednesday.

PepsiCo Inc gained 2.3% after raising its full-year earnings forecast, betting on accelerating demand as COVID-19 restrictions continue to ease.

June-quarter earnings per share for S&P 500 companies are expected to rise 66%, according to Refinitiv data, with investors questioning how long Wall Street’s rally would last after a 16% rise in the benchmark index so far this year.

All eyes now turn to Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday for his comments about rising price pressures and monetary support going forward.

The Dow Jones Industrial Average fell 0.31% to end at 34,888.79 points, while the S&P 500 lost 0.35% to 4,369.21.

The Nasdaq Composite dropped 0.38% to 14,677.65.

Conagra Brands Inc dropped 5.4% after the packaged foods company warned that higher raw material and ingredient costs would take a bigger bite out of its profit this year than previously estimated.

Boeing Co fell 4.2% after the Federal Aviation Administration said late on Monday some undelivered 787 Dreamliners have a new manufacturing quality issue.

Declining issues outnumbered advancing ones on the NYSE by a 2.85-to-1 ratio; on Nasdaq, a 3.06-to-1 ratio favored decliners.

The S&P 500 posted 39 new 52-week highs and no new lows; the Nasdaq Composite recorded 61 new highs and 73 new lows.

Volume on U.S. exchanges was 9.5 billion shares, compared with the 10.5 billion average for the full session over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Cynthia Osterman)

Pepsico Surges to All-Time High After Earnings

Pepsico Inc. (PEP) is trading at an all-time high in Tuesday’s pre-market session after handily beating Q2 2021 top and bottom line estimates and raising fiscal year 2021 earnings-per-share (EPS) guidance. The snack and beverage giant posted a $1.72 per-share profit during the quarter, $0.19 better than expectations, while revenue rose a healthy 20.5% year-over-year to $19.22 billion, beating consensus by more than $1.25 billion.

Managing Food Inflation

The bullish results eased shareholder worries that food inflation will lower margins going forward. The company has done an excellent job so far raising prices and instituting cost saving programs to make up the shortfall, which has forced rivals that include General Mills Inc. (GIS) to post cautionary guidance.  Better yet, Pepsico now expects to “deliver 6 percent organic revenue growth (versus previous guidance of mid-single-digit growth)”.

BofA Securities analyst Bryan Spillane examined the food industry’s pricing challenges this week, noting the macro focus on “inflation as the market bifurcates food and beverage stocks into two camps a) those who are already realizing price increases to cover inflation and protect margins, seen as “the winners” and b) those who have pricing coming through later in 2021 and may experience gaps in earnings/margins over the next few quarters, i.e. “the underperformers”.

Wall Street and Technical Outlook

Wall Street consensus has eased to an ‘Overweight’ rating in the last three months, based upon 11 ‘Buy’, 1 ‘Overweight’, 10 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $135 to a Street-high $167 while the stock is set to open Tuesday’s session about $5 below the median $156 target. This humble placement should support a rapid advance into the mid-$150s, given strong results and guidance.

Pepsico topped out above 147 in February 2020 and plunged to a two-year low during the pandemic decline. The subsequent uptick completed a round trip into the prior high in November, yielding a pullback and bounce that completed a bullish cup and handle pattern in April. Buying interest has surged during the slow advance since that time, signaling a breakout that could gather steam in coming weeks. Better yet, the pattern forecasts a long-term target in the 190s.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held Pepsico in a family account at the time of publication. 

Stocks Poised to Extend Gains Ahead of Earnings Parade

It’s hard to keep stocks down in this bull market. After tumbling on Thursday, the major indices came back with a vengeance on Friday to finish the week at record levels. Investors had shown concern about the economic recovery hitting a stumbling block, but their fears didn’t last.

On Friday, the S&P 500, Dow Jones Industrial Average and Nasdaq all finished the day at fresh all-time highs. Bank stocks reclaimed lost ground from Thursday’s sell-off while travel stocks including airlines also made a quick turnaround.

Trading in stock index futures suggests that Monday will extend Friday’s gains. On Sunday evening, the S&P 500, Dow and Nasdaq index futures were all trading fractionally higher.

Stocks to Watch

The second-quarter earnings parade will begin in earnest this week on Tuesday. Financial services is among the first sectors to report, with Goldman Sachs and JPMorgan in the pipeline, in addition to consumer company PepsiCo. A Cowen & Co. analyst reiterated her outperform rating on PepsiCo shares in recent days.

The economy has been humming along even better than had been anticipated since the pandemic year. The expectations for S&P 500 companies this earnings season are bullish. Profits are poised to increase 65% vs. year-ago levels, as per Refinitive data, a sign that the pandemic pressure is seemingly in the rearview mirror.

Meme stocks bucked the bullish trend on Friday, though. Barron’s seems to think the meme-stock rally has more fuel left in the tank, based on its latest cover.

AMC Entertainment shaved nearly 4% off its value, while GameStop was down fractionally. Investors also appeared to take some profits in Virgin Galactic, which fell nearly 7% on Friday after Thursday’s blockbuster trading session.

Virgin Galactic is still up approximately 14% in the month of July so far. Richard Branson launched into space on Sunday along with a full crew and returned to Earth without a hitch. Now that space tourism is becoming a reality, demand for Virgin Galactic could potentially increase, though analysts are divided about the stock.

Look Ahead

Investors will be looking to gauge how inflation is looking in the economy when the Consumer Price Index comes out on July 13. Wells Fargo economists are expecting an increase of 0.6% for a 5% YoY rate.

Earnings to Watch Next Week: Most Big U.S. Banks, PepsiCo, Delta Air Lines and UnitedHealth in Focus

Earnings Calendar For The Week Of July 12

Monday (July 12)

Ticker Company EPS Forecast
FRHC Freedom $0.72

 

Tuesday (July 13)

IN THE SPOTLIGHT: JPMORGAN, PEPSICO, GOLDMAN SACHS

JPMorgan: The New York City-based multinational investment bank and financial services holding company is expected to report its second-quarter earnings of $3.16 per share, which represents year-over-year growth of over 128% from $1.38 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered earnings surprise all four times, with of over 32%.

JPM has less excess capital as a % of the market cap relative to other names in the group, which drives a lower benefit from buybacks. We are valuing the group on normalized 2023 EPS. We expect a V-shaped recovery will drive higher reserve release and share buybacks over the next 2 years, with “normalized” post-recession earnings beginning in 2023,” noted Betsy Graseck, equity analyst at Morgan Stanley.

“We see more upside elsewhere in the group, particularly in consumer finance stocks which have been under more pressure. This drives our Underweight rating.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its second-quarter earnings of $1.53 per share, which represents year-over-year growth of over 15% from $1.32 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue of $17.91 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of over 6%.

GOLDMAN SACHS: The New York-based leading global investment bank is expected to report its second-quarter earnings of $9.52 per share, which represents year-over-year growth of over 52% from $6.26 per share seen in the same quarter a year ago.

It is worth noting that in the last two years, the world’s leading investment manager has surpassed market consensus expectations for profit and revenue most of the time. The better-than-expected number would help the stock hit new all-time highs.

“Our 2Q EPS est. increases to $10.05 from $9.53 on positive markets and higher equity investment revs. The equity investment line will likely again be a meaningful rev. swing factor (we model $1.4B vs. $3.1B in 1Q21). Post-DFAST, GS indicated that the dividend will increase to $2.00/qtr. from $1.25/qtr., but did not provide specifics on buybacks. We model 2Q share repurchase of $1.5B (vs. $2.2B cons.) and $2.5B/qtr. (vs.$2.3B/qtr. cons.) for the remainder of this year,” noted Daniel T. Fannon, equity analyst at Jefferies.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 13

Ticker Company EPS Forecast
FAST Fastenal $0.41
CAG Conagra Foods $0.52
JPM JPMorgan Chase $3.16
PEP PepsiCo $1.53
GS Goldman Sachs $9.96
FRC First Republic Bank $1.73
HCSG Healthcare Services $0.30
AMX America Movil Sab De Cv Amx $0.32

 

Wednesday (July 14)

IN THE SPOTLIGHT: WELLS FARGO, BANK OF AMERICA, CITIGROUP, DELTA AIR LINES, BLACKROCK

WELLS FARGO: The fourth-largest U.S. lender is expected to report a profit in the second quarter after last year posting its first loss since the global financial crisis of 20028.

Wells Fargo, Bank of America, Citigroup, JPMorgan will tother report profits of $24 billion in the second quarter, up significantly from $6 billion seen last year.

There is no relief for Delta Air Lines, which is expected to post a loss of $1.36 per share on $6.19 billion in revenue.

BLACKROCK: The world’s largest asset manager is expected to report its second-quarter earnings of $9.28 per share, which represents year-on-year growth of over 18% from $7.85 per share seen in the same quarter a year ago.

The New York-based multinational investment management corporation’s revenue would grow over 25% of $4.56 billion. In the last four consecutive quarters, on average, the investment manager has delivered an earnings surprise of over 11%.

The better-than-expected number would help the stock hit new all-time highs. The company will report its earnings result on Wednesday. BlackRock’s shares rose over 24% so far this year. The stock ended 2.83% higher at $901.31 on Friday.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 14

Ticker Company EPS Forecast
WFC Wells Fargo $0.95
BAC Bank Of America $0.77
PNC PNC $3.09
C Citigroup $1.99
DAL Delta Air Lines -$1.36
BLK BlackRock $9.28
INFY Infosys $0.17

 

Thursday (July 15)

Ticker Company EPS Forecast
WIT Wipro $0.07
WNS Wns Holdings $0.68
BK Bank Of New York Mellon $1.00
MS Morgan Stanley $1.66
CTAS Cintas $2.31
UNH UnitedHealth $4.43
USB US Bancorp $1.12
TFC Truist Financial Corp $0.98
HOMB Home Bancshares $0.46
AA Alcoa $1.28
VLRS Controladorauelaavcncv $0.80
PGR Progressive $1.07
TSM Taiwan Semiconductor Mfg $0.93
PBCT People’s United Financial $0.34
WAL Western Alliance Bancorporation $1.96

 

Friday (July 16)

Ticker Company EPS Forecast
ERIC Ericsson $0.13
ALV Autoliv $1.40
FHN First Horizon National $0.40
ATLCY Atlas Copco ADR $0.45
STT State Street $1.77
KSU Kansas City Southern $2.18
SCHW Charles Schwab $0.76

 

PepsiCo Could Scale to Fresh Record High on Upbeat Q2 Earnings; Target Price $156

The Harrison, New York-based global food and beverage leader PepsiCo is expected to report its second-quarter earnings of $1.53 per share, which represents year-over-year growth of over 15% from $1.32 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue of $17.91 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of over 6%.

“On average, analysts expect that PepsiCo will report full-year earnings of $6.05 per share for the current fiscal year, with EPS estimates ranging from $5.91 to $6.13. For the next year, analysts expect that the firm will post earnings of $6.54 per share, with EPS estimates ranging from $6.34 to $6.77,” noted analysts at ZACKS Research.

PepsiCo’s better-than-expected results, which will be announced on Tuesday, July 13, would help the stock hit new all-time highs.

Analyst Comments

“We expect 2Q21 PepsiCo (PEP) EPS of $1.54, 2 cents above the $1.52 Eikon consensus. We forecast +7.9% y-o-y organic sales growth in 2Q21, above the Visible Alpha consensus of +7.3%, as PEP cycles an easy comparison of -0.3% in 2Q20, which was negatively impacted by COVID-19-related closures in the on-premise business. We could see upside to our already above-consensus organic sales growth estimate as we only assume 2-Yr average organic sales growth of +3.8% in 2Q21, which seems conservative vs. +5.2% in 1Q21 and +4.5% in 2020,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We expect PepsiCo (PEP) operating margins to be up modestly (MSe +10 bps YoY) due to an expected yoy GM decline (MSe -100 bps YoY), driven by lower-margin acquisitions, partially offset by a -110 bps YoY expected decline in SG&A as % of sales on the moderation of COVID-19 related costs (which were $378M in the year ago quarter, worth 210 bps on margins), although we expected higher A&P investment in the business.”

PepsiCo Stock Price Forecast

Nine analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $156.00 with a high forecast of $165.00 and a low forecast of $149.00.

The average price target represents 5.25% from the last price of $148.22. From those nine analysts, four rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $165 with a high of $194 under a bull scenario and $104 under the worst-case scenario. The firm gave an “Overweight” rating on the beverage company’s stock.

Several other analysts have also updated their stock outlook. JP Morgan lowered the target price to $154 from $155. Deutsche Bank raised the price target to $149 from $147. Credit Suisse lifted the price target to $155 from $144. Cowen and company upped the price target to $165 from $162. Citigroup increased the price objective to $162 from $161.

Check out FX Empire’s earnings calendar

PepsiCo Completes Major Breakout Pattern

PepsiCo Inc. (PEP) has completed a multiyear breakout pattern and could post impressive upside in coming quarters. Taken together with a 2.90% annual dividend yield and the relative safety of this defensive sector, patient investors could generate stronger annual returns than many so-called growth stocks. That’s especially true after 2020’s red-hot momentum market lifted many equities to unsustainable price levels.

Looking for Multiple Expansion

Beverage plays are no longer cheap, with PepsiCo’s absolute valuation situated near the upper boundary of the historical range. However, the stock looks more attractive when viewed over the last three years, with relative valuation below the 36-month midpoint. Modest multiple expansion looks more than achievable in this view, with the potential for price appreciation between 15% and 20% in the next 12 months.

UBS analyst Sean King recently upgraded the stock to ‘Buy’, listing reasons why investors should take a close look at the beverage giant. He believes the company is “at the mid-point of an investment cycle that will yield a sustainable improvement to top and bottom line growth”. King also reviewed the spreadsheets, noting that “investments in beverage margins and global snacking scale support our above Street outlook for 2021-23 sales growth of 5.7% and EPS growth of 10.0%”.

Wall Street and Technical Outlook

Wall Street consensus has improved since the start of 2021, now standing at an ‘Overweight’ rating based upon 11 ‘Buy’, 2 ‘Overweight’, 9 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $135 to a Street-high $165 while the stock is set to open Wednesday’s session about $7 below the median $155 target.

PepsiCo broke out above a 5-year rising highs trendline in January 2020 and failed the breakout during the pandemic decline, which dumped price more than 30%. The subsequent recovery finally completed a 100% retracement into the prior high at year’s end, giving way to a reversal that posted a higher low in March. The stock has now returned to resistance for the third time, completing a cup and handle pattern that yields a measured move target in the 190s following a breakout.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Coca-Cola Perfectly Positioned for Breakout

Dow component Coca-Cola Co. (KO) is trading lower with U.S. stocks on Tuesday morning but looks are deceiving because the beverage icon is perfectly positioned to complete a rally into 2020’s all-time high and enter a strong uptrend. Seasonality is lending a hand in the uptick, with dividend plays often attracting buying interest in the second and third quarters, as investors sell first half winners and park profits until new opportunities arise.

Pandemic Pummeling

Revenues got battered through most of 2020, with lucrative sports franchises and stadium deals gathering dust due to pandemic shutdowns. Restaurant closures also compounded losses, along with an overly-narrow product line, at least compared to rival PepsiCo Inc. (PEP). The venerable Coke machine even took a hit because thirsty customers were reluctant to hold physical coins and bills or touch potentially-infectious plastic surfaces.

The current downturn in world markets should add to upside in coming months, with growing worries about inflation and over-valuation triggering a flight to safety. However, we can’t rule out the adverse impact of surging agricultural prices, which could undermine profit margins in coming quarters. Even so, it could be a blessing in disguise because targeted price increases have the power to overcome those headwinds and add to the bottom line.

Wall Street and Technical Outlook

Wall Street is getting the message, lifting consensus to a ‘Moderate Buy’ and $60 target. CEO James Quincy supported that bullish analysis in an interview last month, stating the company will exceed guidance if the second quarter strength matches Q1 results. However, he admitted that cost pressures could have an impact as economies reopen and demand rises but said the company will “manage price increases” to maintain profitability.

Coca-Cola completed a round trip into the 1998 high in the 40s in 2013 and entered a multiyear test, finally clearing resistance in 2019. It failed the breakout after posting an all-time high at 60.13 in February 2020, dropping 40% in just five weeks. A slow motion recovery wave reached major Fibonacci resistance in December, yielding a pullback, followed by a bounce that’s now testing that harmonic barrier.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

PepsiCo Q1 Earnings to Rise about 4%; Target Price $150

Harrison, New York-based global food and beverage leader PepsiCo is expected to report its first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 4% from $1.07 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of over 5% to about $14.6 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of nearly 6%.

PepsiCo’s better-than-expected results, which will be announced on Thursday, April 15, would help the stock to recoup this year’s losses. PepsiCo shares, which rose over 8% in 2020, slumped about 4% so far this year.

PepsiCo Stock Price Forecast

Seven analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $150.67 with a high forecast of $161.00 and a low forecast of $136.00.

The average price target represents a 5.49% increase from the last price of $142.83. Of those seven analysts, three rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $158 with a high of $185 under a bull scenario and $102 under the worst-case scenario. The firm gave an “Overweight” rating on the beverage company’s stock.

Several other analysts have also updated their stock outlook. Zacks Investment Research raised shares of PepsiCo from a “hold” rating to a “buy” rating and set a $142price target. Sanford C. Bernstein issued an “underperform” rating and a $136 target price. Deutsche Bank increased their target price to $148 from $143 and gave the company a “hold” rating. Wells Fargo issued an “equal weight” rating and a $157 target price.

Analyst Comments

“We are OW PEP. We forecast Pepsi will post superior topline growth relative to peers driven by exposure to the higher growth/higher margin snacks category (2/3 of PEP’s profit). Snacks is a higher growth category given: (1) shift to snacking vs. sit-down meals; (2) less pressure from health/wellness vs. beverages, and (3) PEP’s leading share in snacks vs. fragmented competition, driving share gains, and higher margins/ROIC,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We also see more structural Pepsi market share benefits post-COVID, as PEP uses its DSD distribution advantage, to gain shelf space and share in snacks, and in beverages, where PEP is advantaged vs competition with a much lower mix in away-from-home.”

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: JPMorgan, Goldman, PepsiCo, BofA, Citigroup and Delta Airlines in Focus

Earnings Calendar For The Week Of April 12

Monday (April 12)

Ticker Company EPS Forecast
HDS HD Supply Holdings $0.39

Tuesday (April 13)

Ticker Company EPS Forecast
FAST Fastenal $0.37
HCSG Healthcare Services $0.28

Wednesday (April 14)

IN THE SPOTLIGHT: JPMORGAN CHASE, GOLDMAN SACHS

JPMORGAN CHASE: The leading global financial services firm with assets over $2 trillion is expected to report its first-quarter earnings of $2.06 per share, which represents year-over-year growth of over 290% from $0.78 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 6%.

The New York City-based investment bank would post revenue growth of about 6% to around $29.8 billion.

“We expect JPMorgan to likely beat the consensus estimates for revenues and earnings. The bank has outperformed the consensus estimates in each of the last three quarters, primarily driven by a jump in the Corporate & Investment Banking segment led by higher sales & trading and investment banking revenues. However, the above growth was partially offset by some weakness in the Consumer & Community Banking segment due to the lower interest rates environment. We expect the sales & trading and investment banking revenues to drive the first-quarter FY2021 results as well,” noted analysts at TREFIS.

“Further, recovery in bond yields over the recent months is likely to benefit core-banking revenues. Additionally, JPM released $2.9 billion from its loan-loss-reserve in the fourth quarter, suggesting some improvement in the perceived loan default risk. We expect the same momentum to continue in the first quarter. Our forecast indicates that JPMorgan’s valuation is around $143 per share, which is 7% lower than the current market price of around $154.”

GOLDMAN SACHS: The leading global investment bank is expected to report its first-quarter earnings of $10.10 per share, which represents year-over-year growth of about 225% from $3.11 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of nearly 50%.

The New York City-based bank would post revenue growth of over 31% to around $11.5 billion.

“We expect Goldman Sachs to outperform the consensus estimates for revenues and earnings. The bank has reported better than expected results in each of the last three quarters, mainly due to its strength in sales & trading and the investment banking space,” noted equity analysts at TREFIS.

“Despite the economic slowdown and the COVID-19 crisis, the company reported strong revenue growth in 2020 driven by a 43% y-o-y jump in global markets division (sales & trading) and a 24% rise in the investment banking unit. We expect the same trend to drive the first-quarter FY2021 results as well. Our forecast indicates that Goldman Sachs’ valuation is around $366 per share, which is 12% more than the current market price of around $327.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 14

Ticker Company EPS Forecast
TSCO Tesco £8.15
INFY Infosys $0.16
JPM JPMorgan Chase $3.06
GS Goldman Sachs $10.12
BBBY Bed Bath & Beyond Inc. $0.31
FRC First Republic Bank $1.54
SJR Shaw Communications USA $0.26
WFC Wells Fargo $0.69
ACI AltaGas Canada $0.51

 Thursday (April 15)

IN THE SPOTLIGHT: PEPSICO, BANK OF AMERICA, CITIGROUP, BLACKROCK, DELTA AIR LINES

PEPSICO: The company which holds approximately a 32% share of the U.S. soft drink industry is expected to report its first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 4% from $1.07 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of nearly 6%.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of over 5% to about $14.6 billion.

“Based on the 2020 performance and evolving business conditions, the company provided guidance for 2021. It expects organic revenue growth in the mid-single digits, with core constant currency EPS growth in high-single digits. It expects a core effective tax rate of 21%. Additionally, the company expects currency tailwinds to aid its revenues and core EPS by 1 percentage point in 2021, based on the current rates,” noted analysts at ZACKS Research.

“Further, it remains committed to rewarding its shareholders through dividends and share buybacks. It anticipates total cash returns to shareholders of $5.9 million, including $5.8 million of cash dividends and $100 million of share repurchases. The company recently completed its share-repurchase authorization and expects no more share repurchases through the rest of 2021.”

BANK OF AMERICA: The Charlotte, North Carolina-based investment bank is expected to report its first-quarter earnings of $0.66 per share, which represents year-over-year growth of over 60% from $0.40 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 9%.

However, the United States’ second-largest bank would see a revenue decline of more than 4% to around $21.7 billion.

CITIGROUP: The New York City-based investment bank is expected to report its first-quarter earnings of $2.52 per share, which represents year-over-year growth of 140% from $1.05 per share seen in the same quarter a year ago. But Citigroup’s revenue would decline about 12% to around $18.3 billion.

BLACKROCK: The world’s largest asset manager with $8.67 trillion in assets under management is expected to report its first-quarter earnings of $7.87 per share, which represents year-over-year growth of over 19% from $6.60 per share seen in the same quarter a year ago. The New York City-based bank would post revenue growth of about 16% to around $4.3 billion.

DELTA AIR LINES: The Airline company which provides scheduled air transportation for passengers and cargo throughout the United States and across the world is expected to report a loss for the fifth consecutive time of $2.84 in the first quarter of 2021 as the airlines continue to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions. That would represent a year-over-year decline of over 450% from -$0.51 per share seen in the same quarter a year ago.

The Atlanta-based airline’s revenue would decline more than 50% to around $3.9 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 15

Ticker Company EPS Forecast
CBSH Commerce Bancshares $0.94
PEP PepsiCo $1.12
WIT Wipro $0.07
BAC Bank Of America $0.66
C Citigroup $2.52
UNH UnitedHealth $4.38
HOMB Home Bancshares $0.43
USB US Bancorp $0.95
SCHW Charles Schwab $0.79
TFC Truist Financial Corp $0.93
BLK BlackRock $7.87
JBHT J B Hunt Transport Services $1.22
AA Alcoa $0.41
PPG PPG Industries $1.57
WAL Western Alliance Bancorporation $1.47
TSM Taiwan Semiconductor Mfg $0.93
DAL Delta Air Lines -$2.84
WAFD Washington Federal $0.48

Friday (April 16)

Ticker Company EPS Forecast
CFG Citizens Financial $0.96
BK Bank Of New York Mellon $0.87
PNC PNC $2.70
ALLY Ally Financial $1.13
STT State Street $1.35
MS Morgan Stanley $1.72
KSU Kansas City Southern $1.97