PepsiCo Beats Earnings Estimates
On Thursday, PepsiCo Inc. (NYSE:PEP) reported better than expected first quarter profit. This boost came as a result of price increases in its beverage business as well as a strong demand for the company’s Frito-Lay snacks in Northern U.S. In their earnings report, PepsiCo reported that their Frito-Lay business showed revenue of $3.32 billion, up 3.1%. This increase was prompted by the launch of new products such as Rold Gold Pretzel Dippers and Cheetos Sweetos. Meanwhile, in terms of their beverage revenue, PepsiCo reported a small increase to $4.43 billion, up 4.4 percent. This marginal increase came as a result of a 3% increase in overall prices despite there being a long-term decline in soft drink sales in the U.S. Added to this, PepsiCo cited a strong U.S. dollar (USD) as having an impact on the company’s overall revenue also stating that the strong greenback is likely to impact earnings by 11 points in 2015 and revenue by about ten percentage points. According to Hugh Johnston, the CFO of PepsiCo, as a result of increasing prices due to the impact of currencies; the demand in Europe was weak. For the first quarter, net revenue declined to $12.22 billion, down 3.2 percent. This marked the first time in 4 quarters that PepsiCo saw a decline in a quarter. After the release of the report, PepsiCo shares traded at $95.72, down 1.6%.
U.S. stocks impressed on Thursday with the main indices closing at record levels. At the close of trading, the S&P 500 index (SPX) rose 0.4%, or 9 points, to 2,117.82. This marked a record close for the benchmark index above a closing level it reached on the 2nd of March. Also making a record close was the Nasdaq Composite index (COMP) which rose 0.5%, or 24 points, to 5,059. For this tech heavy index, this advance marked a record close above its close reached on the 10th of March 2000. Meanwhile, the Dow Jones Industrial Average (DJIA) was also on the upside adding 0.4%, or 73.40 points, to 18,111. The top performance by the indices came in response to a variety of earnings reports as well as weaker than expected new home sales data. According to Randy Frederick, Managing Director of Trading and Derivatives at the Schwab Center for Financial Research, the gains achieved on Thursday came as a result of seasonal bias since the 2nd half of April is considered to be bullish while other factors such as low volatility, higher oil prices and a weakening greenback, also played a role.
On Thursday, the U.S. dollar (USD) traded lower. This decline came as a result of a decrease in new home sales in the U.S. while data also showed that jobless claims in the country rose last week. According to the U.S. Commerce Department, sales of new homes declined 11.4 percent in March to 481,000 units. This missed analyst expectations for a decline to 513,000 units in March, down 5.3 percent. Also, the Department of Labor reported that the total number of individuals filing for initial jobless benefits in the week ending on the 18th of April increased to 295,000, up 1,000. The previous week’s total was at 294,000 and analysts were expecting claims only to decline to 290,000, down by 4,000 last week. The EUR/USD traded at 1.0809, up 0.79% while the GBP/USD also traded up 0.09 percent at 1.5048. The greenback also traded lower than the Swiss franc and the Canadian dollar with USD/CHF down 1.66% at 0.9552 and with USD/CAD down 0.66% and trading at 1.2161. The Japanese yen also traded higher than the USD with USD/JPY trading at 119.77, down 0.12% while the U.S. dollar index was at 97.66, down 0.60%.
On Friday, in morning Asian trading, crude oil prices declined further. WTI crude oil for delivery in June traded at $57.58 a barrel on the NYMEX, down 0.29%. Overnight on Thursday, crude oil prices declined after data released by the by the EIA showed that inventories of crude oil had increased more than expected while investors also turned their attention to the increased tensions in Yemen. According to the EIA, the U.S. added 5.3 billion barrels of crude oil last week which was higher than the expected increase of 2.8 million barrels. Added to this, gasoline stockpiles declined by 2.1 million barrels which beat expectations for a decline of only 0.7 million barrels. On Thursday, Brent crude oil for June delivery traded at $62.70 a barrel, down 4 cents or 0.06 percent, on the ICE Futures Exchange in London.