>>> PepsiCo beats by $0.07, reports revs in-line; raises FY14 core constant curr

PEP US -->+1.05% Pre Open - low volume

PepsiCo beats by $0.07, reports revs in-line; raises FY14 core constant currency EPS growth to 9% from 8%; reaffirms top line and FX headwinds

Reports Q3 (Sep) earnings of $1.36 per share, excluding non-recurring items, $0.07 better than the Capital IQ Consensus Estimate of $1.29; revenues rose 1.8% year/year to $17.22 bln vs the $17.1 bln consensus.
  • Organic revenue grew 3.1% and reported net revenue grew 2 percent. Foreign exchange translation had a 1-percentage-point unfavorable impact on reported net revenue.
    • Developing and emerging market organic revenue grew 8%. On a reported basis, developing and emerging market net revenue grew 3%, reflecting unfavorable foreign exchange translation.
    • Core gross margin and core operating margin expanded 45 basis points reflecting the implementation of effective revenue management strategies and productivity initiatives.
The co now expects 9% (an increase from the co's previous target of 8%) core constant currency EPS growth in fiscal 2014 versus its fiscal 2013 core EPS of $4.37. Based on the current foreign exchange market consensus, the co expects FX to have an unfavorable impact of ~4% points (unchanged) on full year core EPS growth in 2014.

Excluding the impact of structural changes and foreign exchange translation, organic rev in 2014 is expected to grow mid-single digits versus 2013, consistent with the co's long-term target. Based on current FX market consensus, the co expects foreign exchange translation to have an unfavorable impact of ~3% points (unchanged) on full year net revenue growth in 2014.
  • For 2014, the company expects low-single-digit commodity inflation and productivity savings of ~$1 billion. The company expects higher interest expense driven by increased debt balances and a core effective tax rate of ~25%.