One of the first earnings reports for the second quarter hit Tuesday morning when PepsiCo (PEP) put up its numbers. The company reported earnings per share of $1.61 versus $1.50 in the year-ago quarter and estimates of $1.53. Revenues increased about 2%, which was narrowly higher than expectations.
These numbers are good enough to push the Action Alerts PLUS name up around 4%, or $4.22, in early afternoon trading, and puts the stock above its 200-day simple moving average since the beginning of February.
The big takeaway from the report is that customers are eating more Fritos but drinking less Pepsi. The Frito-Lay unit showed sales growth of 5% while the North American Beverage sector fell 1% and Quaker Foods saw a 5% decline.
The company is likely to see a bump in earnings estimates following this report. It has increased EPS guidance for the year to $5.70 from $5.65, which would be growth of about 8% for 2018, and EPS is likely to stay around that level into 2019.
Currently the stock is trading with a trailing P/E of about 20 so its P/E-to-growth (PEG) ratio is roughly 2, which is fairly reasonable for a stock that should have fairly predictable earnings in the future. This is no great bargain but the numbers in Pepsi's report are good enough to make it a safe haven for those that are looking to park some cash.
Overall, the indices continue to do a good job of holding on to gains but momentum is slow again. Breadth is moving close to even and the list of stocks making moves of more than 5% is quite short. I've been a net seller so far, but that is mainly because I can't find much energy out there.
We have a few more earnings report later this week that will attract some attention but we'll have to wait at least another week before the real excitement begins.
Pepsi isn't a bad way to start this earnings season.