Can Pepsi Earnings Win the Pepsi-Coke Investor Taste Test? (PEP, KO)

Pepsico (NYSE:PEP) will grace us with the presence of its earnings Tuesday morning.  Analysts, according to First Call, are looking for EPS to come in at $0.89 on revenues of almost $9.4 Billion.  The following quarter expectations are $0.97 EPS and $9.9 Billion in revenues.  Pepsico of late has had a recent history of beating expectations over the last 4 reports, except for two quarters ago when it merely met expectations.

What will be of interest outside of earnings is the company’s ongoing structure and switch into slightly healthier (or less-bad) snack foods.  If the comapny announces any major changes to its water, juices, and beverages unit, that will take the cake by far.  But with a 3% rise at the end of Monday trading, it doesn’t seem as though many are worried.

Technicians will almost certainly be paying close attention because while the fundamentals have been strong and the weak dollar should theoretically help, the chart has not been able to hold strength.  A break much under $64.25 could even spell some trouble from the pure chartists.  The fundamental crowd from Wall Street analysts has an average target of $75.00, so tomorrow may be key for the next trend in Pepsico shares.  Competitor Coca-Cola (NYSE:KO) exceeded targets last week and its shares closed up less than 1% on that day.  Pepsico shares closed lower the day Coke reported,and with the gain today shares are basically back to the pre-earnings levels.

Jon C. Ogg
July 23, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.