PepsiCo earnings may be pressured by currency fluctuations

Wed Dec 17, 2014 11:15am EST
 
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By Sinead Carew

Dec 17 (Reuters) - PepsiCo Inc earnings could come under pressure in the fourth quarter due to currency fluctuations, investors said, as the company's biggest foreign markets - Russia, Mexico and Canada - have all taken hits to their currencies in recent months.

While international expansion has helped PepsiCo diversify, it has exposed it to broader economic problems and forex volatility, particularly as the U.S. dollar has risen rapidly.

"It probably will factor in to their earnings and it could cause some estimates to come down," said Lori Hudson, portfolio manager at Bahl & Gaynor Investment Counsel Inc in Cincinnati, which owned 900,000 PepsiCo shares at the end of September.

She added, however, that investors often shrug off earnings issues related to currency changes as they tend to be beyond a company's control. "They usually get a pass for that."

Russia accounts for 7.4 percent of PepsiCo's sales. Mexico is the next-largest international market, at 6.5 percent, according to Thomson Reuters data, and 4.8 percent of sales come from Canada.

All three have had their currencies drop sharply against the dollar, none more dramatically than the rouble, which has lost 36 percent of its value this quarter.

PepsiCo shares have been pressured of late, losing 7.6 percent in the last 11 trading days after hitting a record of more than $100 a share on Nov. 28. PepsiCo shares were up 0.2 percent at $92.76 on Wednesday morning.

PepsiCo said on Oct. 9 that it expects foreign exchange rates to take 4 percentage points off overall 2014 earnings and 3 percent off revenue. The company has not revised its guidance since and analyst estimates have changed little so far this quarter. It declined to comment when contacted by Reuters.   Continued...