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

 

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.

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

Earnings to Watch Next Week: Twitter, General Motors, Coca-Cola, PepsiCo and Walt Disney in Focus

Earnings Calendar For The Week Of February 8

Monday (February 8)

IN THE SPOTLIGHT: KKR & Co.

KKR & Co Inc, an American global investment company that manages multiple alternative asset classes, is expected to post earnings of $0.41 per share for last quarter of 2020 with revenue of around $983.08 million. The U.S. private equity firm reported EPS of $0.44 per shares with revenue of $962.07 million in the same period a year ago.

“While we see an attractive organic asset growth trajectory, we also see a recessionary backdrop that raises risk to KKR‘s fee-related earnings growth story if fundraising slows, transaction fees stall, and costs don’t flex as performance fees and investment income decline,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Recessionary backdrop raises risk of balance sheet marks and limited book value growth that could dampen prior ROE generation of mid-teens to 20%+. C-corp structure (as of July 1, 2018 ) with no K-1s should help expand the investor base over time.”

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

Ticker Company EPS Forecast
GPN Global Payments $1.77
RCL Royal Caribbean Cruises -$5.04
SAIA Saia $1.29
ENR Energizer $0.89
HAS Hasbro $1.14
L Loews $0.74
CNA CNA Financial $0.99
DNB Dun & Bradstreet $0.26
AMG Affiliated Managers $3.68
CUB Cubic -$0.01
RAMP Liveramp Holdings Inc $0.07
BECN Beacon Roofing Supply $0.60
JKHY Jack Henry Associates $0.87
KKR KKR & Co LP $0.41
RE Everest Re $0.46
ACM AECOM $0.57
RGA Reinsurance Of America $1.10
OMF OneMain Holdings $1.98
VRNS Varonis Systems $0.12
LEG Leggett & Platt $0.70
SSD Simpson Manufacturing $0.66
AMKR Amkor Technology $0.35
BLKB Blackbaud $0.71
ESE ESCO Technologies $0.49
TTWO Take Two Interactive Software $0.94
NUAN Nuance Communications $0.19
CHGG Chegg $0.49
BAP Credicorp USA $1.60
HQY Healthequity Inc $0.31
CDK Cdk Global $0.68
CORT Corcept Therapeutics $0.17
SPG Simon Property Group $0.90
YALA Yalla $0.12
IX Orix $1.97
RBC Regal Beloit Corporation $1.58
TYOYY Taiyo Yuden ADR $2.47
MAURY Marui ADR $0.98
MELI MercadoLibre $0.39
OSH Oak Street Health -$0.23

 

Tuesday (February 9)

IN THE SPOTLIGHT: TWITTER

Twitter, an online social networking service that enables users to send and read short 140-character messages called “tweets”, is expected to report a profit of $0.25 in the fourth quarter, which represents year-over-year growth of 16% from the same quarter last year when the company reported $0.25 per share.

The social media company will report revenue of $1.19 billion, up over 17% from the year-ago quarter.

“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 TWTR given 1) continued turnaround progress and 2) platform scarcity,” said 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.”

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

Ticker Company EPS Forecast
GT Goodyear Tire & Rubber $0.22
HBI Hanesbrands $0.29
WCC Wesco International $1.37
HAIN Hain Celestial $0.30
ARMK Aramark -$0.41
CNC Centene $0.47
GRA W.R. Grace $0.86
MAS Masco $0.74
SEE Sealed Air $0.78
INCY YTE $0.53
SPGI S&P Global Inc $2.54
JLL Jones Lang LaSalle $3.93
FOXA Twenty-First Century Fox -$0.06
IIVI Ii Vi $0.90
J Jacobs Engineering Group Inc $1.27
MLM Martin Marietta Materials $2.28
FIS Fidelity National Information Services $1.57
WLTW Willis $5.03
NVT nVent Electric PLC $0.42
AVNT Avient Corp $0.45
VSH Vishay Intertechnology $0.28
TDG TransDigm $1.99
IT Gartner $0.82
DD DuPont $0.85
CARR Carrier Global Corp $0.36
NRZ New Residential Investment $0.32
CVE Cenovus Energy USA -$0.06
ENPH Enphase Energy $0.41
AKAM Akamai $1.31
CCK Crown $1.27
THC Tenet Healthcare $1.79
NCR NCR $0.59
OI Owens-Illinois $0.34
HIW Highwoods Properties $0.47
EGP EastGroup Properties $0.61
FISV Fiserv $1.29
WELL Welltower Inc $0.13
UDR UDR $0.09
ACGL Arch Capital $0.38
TWTR Twitter $0.29
FMC FMC $1.47
BKH Black Hills $1.15
CNO CNO Financial Group $0.59
AIZ Assurant $2.07
DEI Douglas Emmett $0.01
PEAK Healthpeak Properties Inc $0.05
G Genpact $0.49
PRI Primerica $2.50
VOYA Voya Financial $1.45
YELP Yelp $0.00
CDAY Ceridian HCM Holding Inc $0.07
LYFT Lyft Inc -$0.72
CSCO Cisco Systems $0.76
MAT Mattel $0.23
QGEN Qiagen $0.65
EXC Exelon $0.73
EXAS Exact Sciences -$0.19
OMC Omnicom $1.63
AMX America Movil Sab De Cv Amx $0.40
VERX Vertex Inc. Cl A $0.07
OJIPY Oji ADR $1.62
RANJY Randstad Holdings $0.49
FOX Twenty First Century Fox -$0.06
KT KT $0.18
SHCAY Sharp ADR $0.08
COTY Coty $0.07

 

Wednesday (February 10)

IN THE SPOTLIGHT: GENERAL MOTORS, COCA-COLA

GENERAL MOTORS: the world’s largest auto manufacturers which ranked number 18 on the Fortune 500 rankings of the largest United States corporations by total revenue is expected to report a profit of $1.64 in the fourth quarter of 2020, which represents year-over-year growth of over 3000% from the same quarter last year when the company reported $0.05 per share.

The auto manufacturer will report revenue of $36.9 billion, up about 20% from the year-ago quarter.

“We are Overweight based on General Motors’ (GM) diversified portfolio, with multiple ways for GM to enhance shareholder value, through: EVs, ICE and Autonomy. GM also has leading North American margins, generates strong cash flow, and has a robust balance sheet,” wrote Joseph Moore, equity analyst at Morgan Stanley.

“We believe that the market is underestimating the SOTP of the GM enterprise via: 1) Legacy ICE, 2) GM EV, 3) GM‘s Ultium Battery business, 4) China JVs, 5) GM Finco, 6) GM Cruise, 7) hidden franchise value in brands such as Corvette and 8) GM Connected Services. GM management has a proven track record to allocate capital away from structurally challenged areas towards re-positioning the business model.”

COCA-COLA: The largest manufacturer, distributor and marketer of soft drink concentrates and syrups in the world is expected to report a profit of $0.42 in the fourth quarter of 2020, which represents a year-over-year decline of over 4.5% from the same quarter last year when the company reported $0.44 per share.

The auto manufacturer will report revenue of $8.74 billion, up about 4% from the year-ago quarter.

“We are Overweight on Coca-Cola (KO) after significant stock underperformance given COVID-19 impacts on KO‘s on-premise eating / drinking out business (~40% of sales) and gas & convenience (~10%) with gov’t mandated restaurant closures and reduced foot traffic. COVID impacts drove a large -26% organic sales decline in 2Q20, but trends improved to -MSD% in July/August and -LSD% in September/October. We forecast a recovery to ~8% organic growth in 2021/2022 with a post-COVID recovery in away-from-home,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe Coke‘s LT top-line growth outlook is above peers, with strong pricing power, and favourable strategy tweaks under Coke’s CEO, including increased innovation and a cultural shift towards a total beverage company.”

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

Ticker Company EPS Forecast
BDC Belden $0.77
PAG Penske Automotive $2.13
TMHC Taylor Morrison Home $0.82
CDW CDW $1.50
IPG Interpublic Of Companies $0.80
UAA Under Armour Inc -$0.07
CIM Chimera Investment $0.31
TEVA Teva Pharmaceutical Industries $0.63
GM General Motors $1.64
IQV IQVIA Holdings Inc $2.00
KO Coca-Cola $0.42
EEFT Euronet Worldwide $0.73
BG Bunge $1.77
CME CME $1.37
BXMT Blackstone Mortgage $0.60
CCJ Cameco USA -$0.04
HCSG Healthcare Services $0.29
AEIS Advanced Energy Industries $1.34
EFX Equifax $1.82
TRMB Trimble Navigation $0.51
EQC Equity Commonwealth $0.02
IRBT Irobot $0.20
ELY Callaway Golf -$0.21
EQIX Equinix $1.49
PACB Pacific Biosciences Of California $0.42
UBER Uber -$0.53
HP Helmerich & Payne -$0.79
TYL Tyler Technologies $1.42
KGC Kinross Gold USA $0.22
PAYC Paycom Software $0.79
WTS Watts Water Technologies $1.01
HR Healthcare Realty $0.04
QLYS Qualys $0.70
TTGT TechTarget $0.41
SLF Sun Life Financial USA $1.08
XPO XPO Logistics $0.68
EXEL Exelixis $0.05
BHF Brighthouse Financial Inc $2.65
AVLR Avalara Inc -$0.06
STAG STAG Industrial $0.08
IFF International Flavors Fragrances $1.19
MFC Manulife Financial USA $0.56
CPA Copa -$2.09
SONO Sonos Inc $0.85
NGVT Ingevity Corp $0.78
REXR Rexford Industrial Realty $0.07
FR First Industrial Realty $0.18
RUSHA Rush Enterprises $0.54
MC Moelis & Company $1.29
CINF Cincinnati Financial $1.19
EQR Equity Residential $0.25
SSNC SS&C Technologies $1.05
CERN Cerner $0.78
NLY Annaly Capital Management $0.29
MOH Molina Healthcare $1.14
AIN Albany International $0.66
WU Western Union $0.42
PDM Piedmont Office Realty $0.05
BE Bloom Energy Corp $0.00
MGM MGM Resorts International -$0.95
ZNGA Zynga $0.09
ASGN On Assignment $1.15
ORLY O’Reilly Automotive $5.09
WH Wyndham Hotels & Resorts Inc $0.04
SAVE Spirit Airlines -$1.43
COHR Coherent $0.78
PVG Pretium Resources $0.08
PRSP Perspecta Inc $0.52
GOCO Gocompare.Com $0.46
PS Pluralsight Inc -$0.02
PTVE Pactiv Evergreen $0.26
AMAT Applied Materials $1.27
NTAP NetApp $1.01
CF CF Industries $0.08
SPWR SunPower $0.10
UA Under Armour C share -$0.07
Z Zillow $0.28

 

Thursday (February 11)

IN THE SPOTLIGHT: PEPSICO, WALT DISNEY

PEPSICO: The company which holds approximately a 32% share of the U.S. soft drink industry is expected to report a profit of $1.45 in the fourth quarter of 2020. According to Zacks Research, analysts expect that PepsiCo will report full-year 2022 earnings of $5.51 per share, with EPS estimates ranging from $5.50 to $5.55.

The company also recently announced a quarterly dividend, which was paid on Thursday, January 7th.

“We are Overweight on PepsiCo (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,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We also see more structural Pepsi market share benefits post COVID-19, 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 much lower mix in away-from-home.”

Walt Disney, a family entertainment company will post EPS of -$0.33 per share in the fiscal quarter.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 11

Ticker Company EPS Forecast
NNN National Retail Properties $0.65
MT Arcelormittal -$0.02
HII Huntington Ingalls Industries $4.56
TSN Tyson Foods $1.52
IRDM Iridium Communications -$0.08
PPC Pilgrim’s Pride $0.32
BWA Borgwarner $0.89
ZBRA Zebra Technologies $3.81
AZN Astrazeneca $0.55
PEP PepsiCo $1.45
FAF First American Financial $1.66
TAP Molson Coors Brewing $0.77
DUK Duke Energy $1.03
BAM Brookfield Asset Management USA $0.60
K Kellogg $0.89
NUS Nu Skin Enterprises $1.19
MAC Macerich -$0.12
THS TreeHouse Foods $1.07
KIM Kimco Realty $0.10
SON Sonoco Products $0.77
POOL Pool $0.76
LH Laboratory Of America $7.83
SSTK Shutterstock $0.52
GNRC Generac $1.97
R Ryder System $0.94
TPX Tempur Sealy International $0.51
KHC Kraft Heinz $0.73
NSIT Insights $1.50
SAFE 3 Sixty Risk $0.29
ALNY Alnylam Pharmaceuticals -$1.93
WSO Watsco $1.01
ILMN Illumina $1.10
NSP Insperity $0.30
ENS Enersys $1.19
MHK Mohawk Industries $2.87
DXCM Dexcom $0.93
TEX Terex $0.02
SPSC SPS Commerce $0.34
AEM Agnico Eagle Mines USA $0.64
CGNX Cognex $0.29
CUZ Cousins Properties $0.19
BIO Bio-Rad Laboratories $3.30
DLR Digital Realty $0.18
FWRD Forward Air $0.72
SGEN Seattle Genetics $0.89
DVA DaVita Healthcare Partners $1.91
CC Chemours Co $0.42
EXPE Expedia -$1.95
BRX Brixmor Property $0.05
SHO Sunstone Hotel Investors -$0.37
FRT Federal Realty Investment $0.28
REG Regency Centers $0.20
DIS Walt Disney -$0.33
VRSN Verisign $1.35
JCOM J2 Global $2.80
TWOU 2U -$0.09
RARE Ultragenyx Pharmaceutical -$1.06
NWE Northwestern $1.35
FLO Flowers Foods $0.24
TU Telus USA $0.19
NCMGY Newcrest Mining Ltd PK $0.59
CX Cemex Sab De Cv $0.02
SBGSY Schneider Electric SA $0.63
AEG Aegon $0.13
NVDA Nvidia $2.80
BCS Barclays $0.20
NICE Nice Systems $1.54
BFAM Bright Horizons Family Solutions -$0.24
AGIO Agios Pharmaceuticals -$1.41
ALKS ALKERMES $0.07
WST West Pharmaceutical Services $1.13
HTA Healthcare Of America $0.43
LPSN LivePerson -$0.01
DAVA Endava Ltd $0.35
JAMF Jamf $0.01
ALXO Alx Oncology Holdings Inc. -$0.39
OMAB Grupo Aeroportuario Del Centro Nort $0.23

 

Friday (February 12)

Ticker Company EPS Forecast
D Dominion Resources $0.76
HUN Huntsman $0.45
SXT Sensient Technologies $0.62
AIMC Altra Industrial Motion $0.69
LECO Lincoln Electric $1.06
PRLB Proto Labs $0.51
MCO Moody’s $1.94
NWL Newell Rubbermaid $0.48
WPC W. P. Carey $0.49
ENB Enbridge USA $0.46
AUY Yamana Gold USA $0.10
YMZBY Yamazaki Baking ADR $0.40

 

Top Blue Chip Picks for 2021

2020 has shaped up as an excellent year but it’s time to move on and think about 2021. Market leaders in one year often underperform in the following year as investors close out top performers and seek lower risk opportunities. These plays often come with stocks that have posted meager returns but are well-positioned for breakouts and sustained uptrends. Let’s look at three blue chip stocks that meet these criteria in an attempt to get a leg up on the competition.

COVID-19 recovery plays are sitting at the top of this list for obvious reasons but lesser known opportunities are developing as well. The broad market also ignored defensive and household plays through most of the year, instead chasing the hottest momentum stocks, initial public offerings, and special purpose acquisition companies (SPACs). These laggards could shine in 2021 because perennially strong performers rarely have two ‘off years’ in a row.

Visa

Dow component Visa Inc. (V) has benefited from the accelerated shift into digital payments triggered by the pandemic and is viewed as a major beneficiary. However, the company depends on payment volume to book profits, exposing price action to broad economic forces. It’s gained about 12% year-to date but has been stuck at the February high for more than three months. Fortunately, price action is now grinding through the last stages of a breakout pattern.

Pepsico

Pepsico Inc. (PEP) rose 23% in 2019 but has struggled in 2020, posting a mediocre 7% return despite an impressive 2.78% annual dividend yield. That’s still a big deal for non-U.S. traders because contracts for difference (CFDs) pay out dividends, just like shares. The stock rallied back to the February 2020 high above 147 in November and has now completed the last stage of a cup and handle pattern that will generate a measured move target in the 190s after a breakout.

McDonald’s

Dow component McDonald’s Corp. (MCD) topped out in August 2019, well before the pandemic hit world headlines. It failed a breakout above 2019 resistance in October 2020 and turned sharply lower, slumping to a three-month low. The stock has posted a meager 8% year-to-date return but that should improve in 2021, with the pandemic running its course and a bullish 18-month pattern that could complete a breakout in the first quarter.

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 Q3 Revenue Grows Over 5% to $18.09 Billion, Forecasts Solid 2020 Earnings; Target Price $155

PepsiCo Inc, an American multinational food, snack and beverage corporation, reported that its overall net revenue rose more than 5% to $18.09 billion in the third quarter and forecasts 2020 core earnings of $5.50 per share, sending its shares up about 1% on Thursday.

The company which holds approximately a 32% share of the U.S. soft drink industry said its attributable net profit rose 9.1% to $2.29 billion. Excluding items, the company earned $1.66 per share, beating expectations of $1.49 per share, Reuters reported.

PepsiCo forecasts full-year organic revenue growth of about 4%, $10 billion in cash from operating activities and free cash flow of about $6 billion.

“Driven by strength in PepsiCo’s (PEP) snacks portfolio, elevated at-home consumption, and moderating headwinds in PEP’s bevs business, the co. remains well-positioned to navigate the challenges of the current env’t. While we expect shares to trade higher on the print, valuation looks generally full at ~24x P/E,” said Kevin Grundy, equity analyst at Jefferies.

At the time of writing, PepsiCo’s shares traded 0.85% higher at $139.78 on Thursday; the stock is also up over 2% so far this year.

PepsiCo stock forecast

Eleven analysts forecast the average price in 12 months at $144.64 with a high forecast of $155.00 and a low forecast of $130.00. The average price target represents a 3.47% increase from the last price of $139.79. From those 11, six analysts rated ‘Buy’, five analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $155 with a high of $180 under a bull scenario and $104 under the worst-case scenario. PepsiCo had its price objective upped by research analysts at to $139 from $137.

Several other equity analysts have also updated their stock outlook. JP Morgan lowered their stock price forecast to $149 from $154; UBS raised the price target to $140 from $136; Deutsche bank upped their price objective to $140 from $139 and Guggenheim raised their target price to $151 from $148.

Analyst comment

“PepsiCo (PEP) is our top beverage pick. 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,” said 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,” he added.

Upside and Downside Risks

Upside: Higher FLNA snacks topline growth, improving North America beverages business on higher investment spend and on-premise recovery, better GM expansion on favourable commodities/better pricing, and higher cost savings from restructuring, highlighted by Morgan Stanley.

Downside: Lower return from PEP’s reinvestment, macro volatility, commodity and FX volatility, greater COVID impacts, worse market share trends in beverages, soda taxes.

Check out FX Empire’s earnings calendar

PepsiCo Q3 EPS to be $1.50, Organic Sales to Grow 2.4%: Morgan Stanley

PepsiCo Inc’s third quarter is expected to be a positive catalyst for the stock with an expected organic topline and EPS beat, according to Morgan Stanley equity analyst Dara Mohsenian, who also forecasts Q3 EPS of $1.50 and 2.4% y-o-y growth in organic sales.

The U.S. multinational food, snack and beverage corporation, PepsiCo is set to report third-quarter 2020 results on Thursday, October 1, before market open.

“We continue to like Pepsi longer-term with a pronounced mix shift to the more attractive snacks business over the last few years with strong underlying fundamentals (even ex-COVID) now at more than two-thirds of corporate profit, with both robust, sustained snacks category growth, as well as PEP’s strong competitive positioning and share gains within snacks. We also see PepsiCo’s (PEP) growth outlook and underlying EPS quality as higher with greater reinvestment under a new CEO,” Morgan Stanley’s Dara Mohsenian said.

“Last, we believe PepsiCo’s valuation remains compelling, with PepsiCo trading one standard deviation below its 5-year NTM relative P/E average vs mega-cap peers and only at a 3% EV/EBITDA premium to food peers, despite much higher LT revenue growth potential (4% at PEP LT vs 2% at food peers), as well as higher margins/ROIC (see PEP Valuation Looks Compelling section below for more detail).”

Morgan Stanley forecast PEP organic sales growth to be driven by its snacks business, and a topline recovery in emerging markets, as well as a sequential improvement in on-premise beverages. In North America, they forecast a solid +6.5% organic sales growth at Frito-Lay North America (FLNA); +7.2% growth at Quaker Foods North America (QFNA); -1.0% decline at Pepsi Beverages North America (PBNA).

For the international business, the investment bank forecast +8.6% y-o-y organic sales growth in APAC on China recovering, +2.5% in Europe with on-premise improving and favourable summer weather, +1.5% in Latin America, and -2.3% in AMESA (Africa, Middle East, South Asia) on a slower recovery, particularly in India.

PepsiCo stock closed 3.30% higher at $137.97 on Monday. The stock is up about 1% so far this year.

Several other equity analysts have also updated their stock outlook. Jefferies raised their target price to $139 from $137; JP Morgan lowered their stock price forecast to $149 from $154; UBS raised the price target to $140 from $136; Deutsche bank upped their price objective to $140 from $139 and  Guggenheim raised their target price to $151 from $148.

Eleven analysts forecast the average price in 12 months at $144.64 with a high forecast of $155.00 and a low forecast of $130.00. The average price target represents a 4.83% increase from the last price of $137.97. From those 11 equity analysts, six rated ‘Buy’, five rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

“PepsiCo is our top beverage pick. 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,” Morgan Stanley’s Mohsenian said.

“We also see more structural Pepsi market share benefits post COVID-19, 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.”

Upside risks: Higher FLNA snacks topline growth, improving North America beverages business on higher investment spend and on-premise recovery, better GM expansion on favourable commodities/better pricing, and higher cost savings from restructuring.

Downside risks: Lower return from PEP’s reinvestment, macro volatility, commodity and FX volatility, greater COVID impacts, worse market share trends in beverages, soda taxes.

Check out FX Empire’s earnings calendar

PepsiCo Revenue Falls About 3% as COVID-19 Restrictions Bite; Target Price $150

PepsiCo Inc, an American multinational food, snack and beverage corporation headquartered in New York, reported that its revenue for the second quarter fell nearly 3% as COVID-19 pandemic drastically affected consumer spending due to strict restrictions imposed to contain the spread of the deadly virus.

However, the global food and beverage leader reported a strong growth in products like Cheetos, Tostitos, Doritos and oatmeal as people stocked up snacks in their homes due to the lockdown.

The company’s net revenue declined nearly 3% to $15.95 billion and net income slumped around 20% to $1.65 billion. On the other hand, online sales of potato chips climbed 93.5% and that for tortilla chips 101.2% for the week ended June 20, according to market data from Nielsen, reported by Reuters.

While PepsiCo’s snacks sales under the Frito-Lay North America unit increased 7%, sales of Quaker Oats jumped more than 20%. However, revenue at its North American beverage division, the company’s biggest contributor, declined 7% as restaurants and bars remain closed during the nationwide lockdown.

At the time of writing, PepsiCo shares traded 2.3% higher at $137.57 and it was little changed this year through Friday.

Executive comment

“Despite being faced with significant challenges and complexities as a result of the COVID-19 pandemic, our businesses performed relatively well during the quarter, with a notable level of resiliency in our global snacks and foods business. The environment has remained volatile and much uncertainty remains about the duration and long-term implications of the pandemic,” Chief Executive Officer Ramon Laguarta said in a press release.

“As a result, we are not providing a financial outlook for the fiscal year 2020 at this time. However, we continue to believe we have ample liquidity and flexibility to meet the needs of our business and return cash to shareholders.”

PepsiCo stock forecast and price target

Twelve analysts forecast the average price in 12 months at $142.64 with a high forecast of $156.00 and a low forecast of $125.00. The average price target represents a 4.15% increase from the last price of $136.96. From those 12, six analysts rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $150 with a high of $175 under a bull scenario and $109 under the worst-case scenario. Jefferies raised price target to $135 from $130 and rated ‘Hold’; Deutsche Bank raised the target price to $139 from $138. We expect it is good to buy as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Analyst view

“We expect a positive stock reaction to a Q2 beat and Pepsi’s guidance for +LSD% organic sales growth in Q3 on the pre-recorded management call. We do note PEP expects y/y margin compression to linger but improve sequentially y/y in Q3, so margin estimates will likely come down, but we suspect the market will be more focused on topline results, particularly given near-term COVID costs will dissipate longer-term. Pepsi also commented that trends and channel dynamics improved in May and June in both developed and emerging markets. See below for country detail,” Dara Mohsenian, equity analyst at Morgan Stanley noted.

“PepsiCo is our top beverage pick. 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. We forecast 30 bps of margin expansion with strong pricing power, and cost-cutting. Pepsi’s slight 2021 EV/EBITDA discount to US food peers (GIS/K) makes little sense given higher LT Pepsi topline growth, EPS quality, and PEP’s superior balance sheet,” He added.

Upside and Downside risks

Re-acceleration of PepsiCo’s FLNA snacks topline growth, improving North America beverages business on higher investment spend, better GM expansion on favourable commodities/better pricing realization, and higher cost savings from restructuring, Morgan Stanley highlighted as the upside risks to PepsiCo.

Lower return from PEP’s reinvestments, macro volatility, commodity and FX volatility, greater COVID impacts, greater competition in beverages, soda taxes, Morgan Stanley highlighted as the downside risks to PepsiCo.

U.S. Stocks Set To Open Higher As Traders Buy Stocks After The Recent Pullback

Coronavirus Continues To Spread Actively Across The World

According to data from Johns Hopkins University, more than 10 million coronavirus cases have been registered in the world since the beginning of the pandemic. The U.S. is at the top of the list with more than 2.5 million cases.

Lately, the increase in the number of new cases has pushed Texas, Florida and California to close bars which are believed to play a big role in the spread of the virus. As reopenings lead to the increase in the number of new cases in some parts of the world, the pace of additional reopenings is unclear.

Nevertheless, S&P 500 futures were able to shrug off virus worries during the premarket trading session and are pointing to a higher open as traders rush to buy stocks after the recent pullback.

Facebook In Spotlight As More Advertisers Join The Boycott Campaign

Shares of Facebook have suffered an 8% loss on Friday as the company found itself under pressure due to a boycott campaign aimed at improving the moderation process and removing hate speech from the platform.

Many companies have already joined this campaign and refused to buy ads from Facebook, and new names are added every day. According to a FOX Business Network report, Pepsi has joined the campaign over the weekend.

Facebook shares have already fully recovered from the losses they incurred during the acute phase of the coronavirus crisis and are up 5% year-to-date even after the recent sell-off.

However, the stock looks set to continue the current downside move as it is already losing ground in the premarket trading session.

Traders Await Key Employment Reports

On Wednesday, the U.S. will provide ADP Employment Change report for June. On Thursday, the market will have to digest new data on Initial Jobless Claims, Continuing Jobless Claims and Non Farm Payrolls.

These reports will likely have a major impact on market sentiment. At this point, the market is worried about the spread of coronavirus but these worries are offset by optimism about the economic recovery.

Currently, global markets are undecided about future direction. The U.S. dollar, which serves as the safe haven asset of last resort, is losing ground, while the other safe haven asset, gold, continues its upside move.

The release of the employment reports should provide traders with more data on the health of the economy and set the trend for the next few weeks.

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