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Market Update

Earnings on Tap: PepsiCo

Weakness in consumer demand and rising costs could weigh on results.

Oct 11, 2011

PepsiCo (PEP) is slated to post quarterly earnings before the stock market opens Wednesday. Wall Street analysts, on average, expect the beverage and snack-food maker to report earnings of $1.30 per share, compared with $1.19 in the year-ago quarter (excluding one-time items).

Pepsi continues to face soft consumer demand along with increased input costs. The firm raised prices during the quarter, and whether the move affected revenue will be seen. During the prior quarter's earnings announcement, management lowered its EPS forecast for the full year. In the three-month period since, Pepsi shares have lost about 12% of their value, which is roughly in line with the broad market's losses over the same period.

After the recent weakness, Morningstar analysts think the stock is trading at a discount to their fair value estimate of $76 per share, though they acknowledge that the firm faces a tough second half.

Investors will also eye international sales and whether high-growth emerging economies were able to offset sluggishness in developed markets.

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