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PepsiCo (NASDAQ:PEP) will release first-quarter results on Tuesday, with investors awaiting an improvement in the drinks giant’s performance, especially after it reported a decline in fourth-quarter sales amid weak consumer spending.
Wall Street expects PepsiCo to report earnings per share of $1.52, while revenue is expected to increase 1.5% to $18.11 billion.
The New York-based company is facing challenges as multiple price increases put pressure on demand for its drinks and chips. PepsiCo said during its fourth-quarter earnings call that it is seeing a slowdown in the U.S. market for both the food and beverage categories.
In early February, the company released results that fell short of consensus and provided a full-year forecast for organic revenue growth and EPS growth, both of which fell short of analysts’ expectations. Total revenue declined 0.5% year-over-year during the quarter.
The consumer staples sector remained among the bottom four worst-performing sectors in the first quarter, bettering only real estate, consumer discretionary and utilities.
PepsiCo shares have gained more than 2% so far this year, underperforming the broader S&P500 index’s 4% rise.
Morgan Stanley said it expects relatively in-line results for the company in the first quarter.
“We continue to believe that investors should look forward to a fundamental inflection after the first quarter, and that in-line first quarter results with strong international results expected amid weak US scanner data should help the market look beyond the depressed first quarter results,” said Morgan Stanley analyst Dara. Mohsenian.
Argus also lowered PepsiCo’s ratings over concerns that price increases could slow revenue growth as consumers choose to dine out instead of eating at home.
“Looking ahead, we believe consumers are tired of price increases and are opting for less expensive products,” added Argus analyst John Staszak.
Meanwhile, Mohsenian believes PepsiCo’s relative pricing power will shift from negative to positive, with the company expected to have an advantage over consumer packaged goods competitors in both snacks and beverages.
Over the past two years, PepsiCo has exceeded estimates 100% of the time and exceeded revenue estimates 88% of the time.
Seeking Alpha analysts are cautious and have rated the stock as Hold. However, Wall Street analysts and Seeking Alpha’s Quant Ratings are bullish and rate it a Buy and Above.
Over the past three months, EPS estimates have seen no upward revisions versus 14 downward revisions, while revenue estimates have seen no upward revisions versus nine downward moves.