10-QPeriod: Q1 FY2018

PEPSICO INC Quarterly Report for Q1 Ended Mar 24, 2018

Filed April 26, 2018For Securities:PEP

Summary

PepsiCo Inc.'s Q1 2018 report shows a 4% increase in net revenue to $12.6 billion, driven primarily by volume growth and effective net pricing across its divisions, particularly in Latin America, ESSA, and AMENA. While operating profit saw a slight decrease of 3% to $1.8 billion due to increased operating costs, commodity inflation, and a one-time bonus related to the Tax Cuts and Jobs Act (TCJA), net income attributable to PepsiCo rose by 2% to $1.34 billion, resulting in diluted EPS of $0.94, a 3% increase year-over-year. The company also saw a favorable impact from foreign exchange rates, which contributed positively to net revenue growth in several international segments. Financially, PepsiCo ended the quarter with a strong cash position of $13.4 billion and increased its cash dividend by 15.2% in February 2018, signaling confidence in its future performance and commitment to returning capital to shareholders. The company continues to manage its productivity initiatives and global business transformation, while navigating the complexities of the TCJA and its provisional tax expense. Investors should note the impact of the TCJA on the tax rate and the company's ongoing evaluation of its financial implications.

Financial Highlights

50 data points
Beta

Revenue

$12.56B

55.0% Gross Margin

Net Income

$1.34B

10.7% Net Margin

EPS (Diluted)

$0.94

Total Assets

$81.89B

Cash & Equivalents

$13.44B

Free Cash Flow

-$1.31B

Financial Statements
Beta
Revenue$12.56B
Cost of Revenue$5.66B
Gross Profit$6.91B
SG&A Expenses$5.10B
Operating Income$1.81B
Interest Expense$294.00M
Net Income$1.34B
EPS (Basic)$0.94
EPS (Diluted)$0.94
Shares Outstanding (Basic)1.42B
Shares Outstanding (Diluted)1.43B

Key Highlights

  • 1Net revenue increased by 4% to $12.6 billion, driven by global volume growth and effective net pricing.
  • 2Operating profit decreased by 3% to $1.8 billion, impacted by operating cost increases, commodity inflation, and a one-time bonus related to the TCJA.
  • 3Net income attributable to PepsiCo rose by 2% to $1.34 billion, with diluted EPS increasing by 3% to $0.94.
  • 4International segments, particularly Latin America, ESSA, and AMENA, showed strong net revenue growth (14%, 15%, and 7% respectively), aided by favorable foreign exchange.
  • 5The company maintained a strong liquidity position with $13.4 billion in cash and cash equivalents.
  • 6PepsiCo announced a 15.2% increase in its annualized dividend and significant share repurchase programs, signaling commitment to shareholder returns.
  • 7The company is still evaluating the full financial impact of the Tax Cuts and Jobs Act (TCJA), including an expected additional provisional transition tax expense.

Frequently Asked Questions

PepsiCo's net revenue increased by 4% to $12.6 billion, primarily driven by a combination of volume growth and effective net pricing across its global operations. International segments, in particular, saw strong growth supported by favorable foreign exchange.

Operating profit decreased by 3% to $1.8 billion due to several factors, including increased operating costs, higher commodity inflation (especially for potatoes and cooking oil), and a one-time bonus paid to U.S. employees in connection with the Tax Cuts and Jobs Act (TCJA), which negatively impacted operating profit by 4.5 percentage points. These were partially offset by planned cost reductions and favorable foreign exchange.

The TCJA significantly reduced the U.S. corporate income tax rate, which led to a decrease in PepsiCo's effective tax rate. The company also recorded a provisional net tax expense in prior periods related to the TCJA and expects to incur additional provisional transition tax expenses. While the lower tax rate is beneficial, the overall impact is still being evaluated, and the company noted a one-time bonus payment related to the act.

PepsiCo demonstrated a strong commitment to shareholder returns by announcing a 15.2% increase in its annualized dividend to $3.71 per share and by detailing new and existing share repurchase programs. The company expects to return approximately $7 billion to shareholders in 2018 through a combination of dividends and share repurchases.