Pepsi (PEP) is one of the first companies to report Q3 earnings. While the carbonated beverage business in North American is essentially a flat business (volumes grew 1% ex-acquisitions) the rest of Pepsi’s business showed some resiliency. The non-US business, particularly in emerging markets is doing exceptionally well and the snack business (Frito-Lay) is also leading growth from both higher volumes and pricing power. Some growth rates which were discussed on the conference call for the international snack business:
EM Snack business volume growth:
- China: +31%
- India: +26%
- Saudi Arabia: +24%
- Egypt: +15%
- Turkey: +22%
- Russia: over 35%
EM beverage business is growing volumes between high single digit and double digits, and Gatorade volumes grew 9% around the world.
While Alcoa was disappointing, the materials sector is one of the worst positioned for the near term dynamics of strong dollar, lower commodity pricing, and slowing growth.
Pepsi had a very constructive call and the near-term technicals for the stock now look good. There are many stocks similarly positioned as we head into Q3 earnings.
