PepsiCo (PEP) Q4 2014 earnings summary

Executive summary

• 2014 organic revenue grew 4%; core constant-currency EPS rose 9% to $4.63, meeting or exceeding financial targets.

• Q4 organic revenue grew 5%; reported revenue fell 1% in Q4 and was flat for FY, pressured by FX translation.

• Returned $8.7B to shareholders in 2014.

Financial highlights

• FY reported net revenue was $66.683B, operating profit $9.581B, net income attributable to PepsiCo $6.513B and diluted EPS $4.27.

• Q4 reported net revenue was $19.948B, operating profit $2.031B, net income attributable to PepsiCo $1.311B and diluted EPS $0.87.

• FY core constant-currency operating profit grew 5%; core gross margin expanded 55 bps and core operating margin 30 bps.

• Productivity savings totaled $1B in 2014.

Outlook and guidance

• 2015 targets: mid-single-digit organic revenue growth and 7% core constant-currency EPS growth, from FY2014 core EPS of $4.63.

• FX translation is expected to reduce 2015 reported revenue growth and core EPS performance by ~7 percentage points each.

• 2015 outlook includes low-single-digit commodity inflation, ~$1B in productivity savings, a ~25% core tax rate and higher interest expense from increased debt.

• Targets exceed $10B in operating cash flow and $7B in free cash flow excluding certain items; net capital spending is expected to be ~$3B.