Wall Street analysts are anticipating an EPS of $1.27 and revenue of $16.19 billion. The Estimize consensus is more optimistic, expecting an EPS of $1.30 and revenue of $16.28 billion.
Can The North American Business Provide Growth?
PepsiCo’s (NYSE:PEP) North American Business consists of Frito-Lay North America, Quaker Foods North America, and North America Beverages (Latin America is now grouped in its own category.)
Last quarter Frito-Lay N.A. attributed for roughly 22% of the company’s net revenue. The consistency of this business segment has helped counteract currency headwinds on international sales, highlighting a competitive advantage Pepsi has with is competitors, more specifically Coca-Cola (NYSE:KO). Coca-Cola and other rivals do not have the multifaceted model of the snack business that Pepsi employs.
PepsiCo competes with companies like Mondelez International (NASDAQ:MDLZ) in the international snack space, however, there is speculation that a merger with PepsiCo might be able to benefit Mondelez.
In terms of revenue, the North American Beverage division is Pepsi’s bread and butter operation. Last quarter, this division accounted for 32.1% of the company’s net revenue. PepsiCo owns the likes of Gatorade and Lipton tea, which is helping offset declining soda sales as the trend towards healthier beverages is sweeping the nation.
In order to see substantial growth, Pepsi must be creative with their snack lines. As Americans are looking for healthier options, Pepsi must attempt to cater some of their business towards this trend. However, changing brand perception may be difficult, as Frito-Lay is known for producing and distributing “junk food.” In any case, the company does have the means to acquire or even create new brands. It remains to be seen how PepsiCo tackles this issue.
Competition With Coca-Cola?
Everyone knows of the bitter rivalry between Pepsi beverages and Coca-Cola beverages. Due to falling sales of Diet Pepsi, the Purchase, NY based soft drink provider substituted the key artificial sweetener, aspartame, with sucralose, in efforts to compete with Diet Coke. This revamped Diet Pepsi line hit shelves in the US in August, which the company hopes will sweeten sales amidst consumer health concerns over the consumption of aspartame. Coca-Cola introduced Coca-Cola Life, a product that has half the calories of the standard Coke but uses natural cane sugar and plant sweetener Stevia.
Pepsi has also teamed up with Starbucks (NASDAQ:SBUX) to provide ready-to-drink (RTD) coffee and energy drink beverages in Latin America. This initiative will commence in 2016.
This upcoming earnings report is crucial for Pepsi, as investors will want to know the state of the soft-drink business and any future innovations for growth.