PepsiCo, Inc. (NASDAQ: PEP) today reported results for the third quarter 2018. “We are pleased with our results for the third quarter,” said Chairman and CEO Indra Nooyi. “We continued to see very strong operating performance from our international divisions, propelled by developing and emerging markets; Frito-Lay North America generated solid net revenue and operating profit growth; and North America Beverages delivered another quarter of sequential improvement in top-line performance. On the strength of our year-to-date results, we have revised upward our full-year organic revenue growth target. Additionally, given the recent strengthening in the U.S. dollar we have revised our full-year core earnings per share target to reflect our updated expectation of an approximate 1 percentage point headwind from foreign exchange translation.”
Summary of Third-Quarter Financial Performance:
- Reported third-quarter and year-ago results were impacted by a provisional transition tax expense related to the Tax Cuts and Jobs Act (TCJ Act), a non-cash tax benefit resulting from the conclusion of certain international tax audits, restructuring charges and commodity mark-to-market net impacts. See A-6 to A-8 for further details.
- Reported net revenue increased 1.5 percent. Foreign exchange translation had a 2-percentagepoint unfavorable impact on reported net revenue growth. Organic revenue, which excludes the impacts of foreign exchange translation and acquisitions, structural and other changes, grew 4.9 percent.
- Reported gross margin contracted 30 basis points and core gross margin contracted 10 basis points. Reported operating margin contracted 75 basis points and core operating margin contracted 25 basis points.
- Reported operating profit decreased 3 percent and core constant currency operating profit increased 2 percent. Commodity mark-to-market net impacts and restructuring charges negatively impacted reported operating profit performance by 2 percentage points and 1 percentage point, respectively. Foreign exchange translation negatively impacted reported operating profit performance by 2 percentage points.
- The reported and core effective tax rates in the third quarter of 2018 were 7 percent and 17.6 percent, respectively. The reported and core effective tax rates in the third quarter of 2017 were 22.3 and 22.2 percent, respectively. A non-cash tax benefit resulting from the conclusion of certain international tax audits reduced the reported effective tax rate by 13 percentage points. The provisional transition tax expense increased the reported effective tax rate by 3 percentage points.
- Reported EPS was $1.75, an increase of 18 percent from the third quarter of 2017. Foreign exchange translation negatively impacted reported EPS growth by 2 percentage points.
- Core EPS was $1.59, an increase of 7 percent. Excluding the impact of foreign exchange translation, core constant currency EPS increased 9 percent (see schedule A-11 for a reconciliation to reported EPS, the comparable GAAP measure).
- Net cash provided by operating activities was $3.6 billion.
- Full report.