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PepsiCo Issues Earnings Warning For 2019 Due To More Planned Investments

PepsiCo Issues Earnings Warning For 2019 Due To More Planned Investments
PepsiCo Inc issued a warning for its 2019 earnings in its forecast for the year while announcing its fourth quarter results which were largely according to expectations of analysts. One of the largest coverage companies of the world said there would be a drop in 2019 earnings because of more investments being planned by the company in some of its most important and successful products.
There was a 13.7 per cent year on year increase in the core earnings for the three months ending in December which was reported by Pepsi at $1.49 per share which was in line with the expectations of Wall Street. The company also reported group revenues according o analysts’ expectations but there was very little year on year growth at $19.524 billion. The annual dividend of the company would be boosted by 3 per cent to $3.82 per share, Pepsi also said.
While forecasting for 20189, the company predicted that there would be a 1 per cent drop in core earnings primarily because of "incremental investments that are intended to further strengthen the business". The company however also noted that in the following year, Pepsi Group should be back to a "high-single-digit core constant currency EPS growth" rate.
"We are pleased with our results for the fourth quarter and the full year 2018," said CEO Ramon Laguarta. "We met or exceeded each of the financial objectives we set out at the beginning of the year. Frito-Lay North America and each of our international sectors performed very well, and our North America Beverages sector made progress throughout the year."
"In 2019, we aim to capitalize on the momentum we have as we enter the year, and to continue to invest in the capabilities that will better position us for success for years to come," he added.
There was a marginal increase of 0.35 per cent in pre-market trading for Pepsi stocks soon after the announcement of the results and the earnings release.
Muted forecast for 2019 earnings had earlier also been made by Pepsi rival Coca Cola in which the company noted that there would be a slowdown in revenues from organic growth and it is likely that in 2019, there would be little growth in  comparable earnings mostly because of the anticipated strength of the US dollar.
Over the three months ending in December, there was a 1.1 per cent rise in the U.S. dollar index, which benchmarks the greenback against a basket of six major global currencies.  However the currency ended December at a 3.8 per cent appreciation than the fourth quarter of 2017.
According to the forecast by Coca Cola made a day earlier, there would be a 4 per cent comparable growth in its organic revenues which would be lower than the 5 per cent that its reported for 2018. It also anticipates a 12 per cent to 13 per cent gain in currency-neutral revenues. The company said that there would be a drop in revenues between 6 per cent and 7 per cent in revenues because of strong headwinds in currency markets.

Christopher J. Mitchell

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