Solid Earnings from PepsiCo Point to Continued Growth Overseas

PepsiCo (NYSE: PEP) reported earnings last week, and the beverage and snack purveyor posted solid results:

  • Net revenue of $12.7 billion, up from $12.0 billion (4% increase year-over-year)
  • Net income of $1.34 billion, up from $1.32 billion (2% increase YOY)
  • Earnings of $0.94 per share, up from $0.91 per share (3% increase YOY)

If you’ll recall from a few weeks ago, the main thing I was watching for in my investment in PepsiCo was its non-soda business (through its ownership in Frito Lay and Quaker Foods) and its impact on the bottom line as people drink less sugary drinks in general. The company specifically mentioned a decrease in operating profit for both segments during the quarter, primarily driven by cost inflation and bonuses paid in response to the Tax Cuts and Job Act. However, productivity gains helped offset the losses felt, with Frito Lay and Quaker Foods showing an overall increase in 3% between the two segments. Continue reading

FR: 1 Refreshing Stock That Has What This Fool Wants

Article: 1 Refreshing Stock That Has What This Fool Wants

Up next in my “Fool Revisited” series was yet another sector piece, this time about the beverage industry. It’s also my first article with a fancy chart, so maybe that was encouraged during that particular week. It was also written on the heels of my previous Ford article, as I looked to establish a stable of companies that I could start following more closely in the expectation of starting to invest beyond a 401(k).

The beverage company that I chose was Coca-Cola (NYSE: KO) for a lot of reasons. As outlined in the article, they are the best company at selling flavored sugar water to the masses, as well as bottling and distributing their brands and other partners. Coke has also expanded its non-soda offerings by completing the acquisition of Honest Tea earlier in 2011, so it looked like they were going to not rely only on (very bad for you) soda.

Here is an ancient tweet announcing the article:

While things seemed rosy at the time – Coca-Cola probably wasn’t going to see massive growth, but rather be a nice stable stock that would at least keep pace with the market – that didn’t bear out over the past 6+ years. Had an investor purchased and held onto Coca-Cola after the publication of my article, which was positive, they would have kicked themselves for not simply investing in the S&P 500. The compound annual growth rate (CAGR) and total growth of Coca-Cola trailed the S&P 500 despite a pretty healthy dividend from article publication (September 23, 2011) through January 12, 2018:

Stock Start Price End Price CAGR Total Growth Value of $10,000
Coca-Cola $27.86 $46.15 8.33% 65.65% $16,565
S&P 500 $1,136.43 $2,786.24 15.27% 145.17% $24,517

Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits

Soda stocks tend to be pretty steady performers, though focusing specifically on soda-like products in a health conscious environment may not be the path to success anymore. I’m personally a bigger fan of Pepsico (NYSE: PEP) for this very reason since they diversify a bit beyond the sugary drinks by selling salty snacks. This has also bore out in its return over a similar period, with a total growth of over 130%, which isn’t that far off of the S&P 500 returns. This is one of the reasons why I invested in Pepsi within my mother’s portfolio that I manage (but also because she is a pretty regular Pepsi drinker). Therefore, if given the choice between the two, my choice would be Pepsi, but it would also not me the first choice for new money invested in the market.

Until next time…

Disclaimer: I do not own currently own shares in Coca-Cola, but I did purchase shares of Pepsi for my mother in her retirement portfolio in 2015, which she still owns. However, I have no plans to purchase shares of either company within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.