ETF Impact On Coca-Cola Company and PepsiCo, Inc. Earnings [Consumer Staples Select Sect. SPDR (ETF)]

market outlookThe low-carb craze may be in the best interest of a lot of people, but it is the worst nightmare for the many in the beverage industry. The rising health consciousness has been a drag for cola giants for quite some time now. Still, two cola as well as food behemoths – The Coca-Cola Company(NYSE:KO) and PepsiCo, Inc.(NYSE:PEP)– made some progress in Q2 with their better-than-expected earnings.

Q2 will remain especially memorable for Coca Cola as the company snapped the trend of just matching the Zacks Consensus Estimate on bottom lines after four successive quarters. However, the company still needs to improve on its top line figures.

On the other hand, PepsiCo – a Zacks Rank #2 (Buy) company – carried out its winning earnings momentum and raised its full-year adjusted earnings guidance (read: Consumer Staples ETFs in Focus on Philip Morris Stock Slide).

Results in Detail 

On July 22, Coca-Cola reported adjusted earnings of $0.64 per share in 2Q which beat the Consensus Estimate by a penny. Adjusted earnings nudged up 1% year over year (6% on a constant currency basis) mainly on better sparkling beverage volumes almost across the globe and price/mix gains. Sponsorship of the FIFA World Cup and marketing program in several international markets helped the company gain market share in the sparkling beverage space.

Net revenue slipped 1% year over year to $12.57 billion due to headwinds from currency and structural changes. Excluding these effects, constant currency revenues grew 3% in the quarter. However, net reported revenue fell short of the Zacks Consensus Estimate of $12.85 billion.

As far as guidance is concerned, the company refrained from forecasting specific revenue or earnings figures. The structural changes accomplished in 2013 will likely mar second-half 2014 net sales and operating income by 1–2% and 3%, respectively.

PepsiCo’s second-quarter 2014 core earnings per share of $1.32 (reported on July 23) breezed past the Zacks Consensus Estimate of $1.23. On a year-over-year basis, earnings grew 1% thanks to solid margins. Total sales of $16.89 billion inched up 0.5% year over year and matched the Zacks Consensus Estimate.

Enhanced beverage volumes, strong business in Frito-Lay snacks and a better show in emerging markets more than made up for the sluggishness in Mexico and Europe. Market experts like Reuters believe that the improvement in both categories – drinks and snacks – will likely help PepsiCo to defend itself from activist investor Nelson Peltz’s demand for a spilt in beverages and snacks division, due to PepsiCo’s beverage business underperforming.

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