PEP

Portion Packs Still in Strong Demand at Green Mountain; Free Cash Flow Surges in Fiscal 2013

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On Thursday, Green Mountain (GMCR) reported excellent fiscal fourth-quarter results. Fourth-quarter revenue advanced 22% from the same period a year ago (52-to-52 weeks) thanks to robust brewer sales and portion pack revenue growth (up 11% and 21%, respectively, as adjusted). The 21% increase in portion packs revenue was driven by a 26% increase in unit volume offset by pricing and mix. Portion packs revenue accounted for 74.2% of total net sales in the fiscal fourth quarter. The company’s gross margin expanded 240 basis points during the quarter, to 36%, thanks primarily to favorable green coffee costs and lower labor and overhead manufacturing costs. Non-GAAP operating income advanced to 18.2% of sales in the period from 16.4% in last year’s quarter. … Read more

Clorox Faces Cash Flow Headwinds in Fiscal 1Q

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Our general takeaway after surveying calendar third-quarter results from peers Hershey (HSY), Colgate-Palmolive (CL), and Unilever (UN) was that performance in the consumer staples space was mostly positive during the third quarter and that emerging-market performance remains robust (even though Unilever toned down expectations a bit). Clorox’s (CLX) better-than-expected fiscal first-quarter results, released Thursday, did not deviate from the mostly positive newsflow. Sales expanded 2% (3.5% excluding the negative impact from currency), and the company recorded pretax profit growth of 7%. Volume for the fiscal first quarter advanced 1% thanks to gains from Professional Products, Charcoal, Laundry and Burt’s Bees offset by declines in Home Care. Gross margins were flat as cost savings and price increases mitigated higher manufacturing and logistics … Read more

Surveying the Cola Companies’ Third-Quarter Results

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Coca-Cola (KO) On Tuesday, Coca-Cola (click ticker for report: ) announced decent third-quarter results that showed global volume expansion and share gains in North America for both the sparkling and still-beverage categories. Though reported revenue declined 3% in the period, revenue – adjusted for structural changes and currency – advanced 4% in the quarter. Likewise, comparable currency-neutral operating income jumped 8%, driving comparable earnings per share growth of 4%. Free cash flow generation of $6.1 billion year-to-date represents 17% of sales. Coca-Cola Americas grew volume 1% in both the quarter and year to date, with North America volume up 2% and Latin America volume even in the quarter. Coca-Cola International grew volume 3% in both the quarter and year to … Read more

Pepsi Profits from Strong Gross Margins

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Beverage and snack giant Pepsi (click ticker for report: ) reported strong second quarter earnings improvement Wednesday morning. Core earnings per share increased 17% year-over-year to $1.31, easily exceeding consensus estimates. Organic revenue rose 4% year-over-year, but reported revenue increased just 2% year-over-year to $16.8 billion, still slightly ahead of consensus. Free cash flow year-to-date stands at $2.1 billion, equal to 7% of total revenues. The headline for the second quarter at Pepsi was gross margin improvement. “Core” gross margins increased 120 basis points year-over-year, and reported gross margins improved 110 basis points year-over-year to 53%. The firm benefitted from lower input costs, so the improvement mostly came from external factors rather than internal improvements. Even though Pepsi ramped up … Read more

Weak Volume Growth Weighs on Coca-Cola

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Leading soft drink maker Coca-Cola (click ticker for report: ) posted lackluster second quarter results Tuesday morning. Revenue declined 3% (+2% excluding currency) year-over-year to $12.8 billion, falling short of consensus estimates. Comparable earnings per share (a non-GAAP figure) increased 4% year-over-year to $0.63, in-line with consensus expectations. With lower capital expenditures than in the year prior, free cash flow is roughly flat year-to-date at $2.8 billion, approximately 12% of revenue. Image Source: Coca-Cola Eurasia and Africa outperformed the rest of the company as volumes surged 9% year-over-year, annualizing 10% expansion in the same period a year ago. Currency headwinds weighed on net revenue growth, which totaled 5% (11% excluding currency). The markets in Eurasia and Africa have consumption rates … Read more

Lack of Cost Control and Demand Risk: The Story of Monster Beverage

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Earlier this week, energy drink producer Monster Beverage (click ticker for report: ) reported lackluster first quarter results due to lower sales growth and a lack of cost containment. Revenue was well below consensus expectations, growing just 7% year-over-year to $484 million compared to the last several quarters of double-digit revenue growth. Earnings fell 10% year-over-year to $0.37 per share, which failed to come close to the consensus estimate. According to Monster’s management, the entire energy drink industry experienced weak sales growth during the first quarter relative to the powerful double digit growth rates the industry has become accustomed to. What’s driving the weakness? It appears to be largely related to health issues. The FDA provides a report describing the negative … Read more

Coca-Cola’s Steady Growth Continues

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Warren Buffett holding and dividend growth stalwart Coca-Cola (click ticker for report: ) reported solid fourth-quarter results Tuesday morning. Revenue increased 4% year-over-year to $11.4 billion, a touch below expectations (but this was the result of unfavorable swings in currency). Adjusted earnings rose 15% year-over-year to $0.45 per share, a penny north of consensus estimates. Coca-Cola did a fantastic job controlling expenses, with SG&A declining 120 basis points as a percentage of sales to 37.7%. The company has been laser-focused on delivering cost savings since 2008, and the firm anticipates generating annualized savings of $550-$600 million during the next four years. Such improved operational leverage could lead to the robust earnings expansion that shareholders have become accustomed to during the past … Read more

A Dual Focus on Valuation and Yield Is the Best Way to Combat Changes in Future Dividend Tax Rates

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With a potential hike in the dividend tax rate just around the corner, there is no more important time than now for income investors to evaluate their existing portfolio holdings to determine whether they are well-positioned for a higher-tax environment. Assuming there are no changes to the current trajectory, the top dividend tax rate is expected to rise to 39.6% next year (up from 15% currently), and the highest-income earners will see a Medicare surtax on top of that. Evaluate All Aspects of a Dividend Investment First of all, we think those investing in high-yielders (firms) at any price (HYAAP) may be most affected by this change in tax rates. These high-yielders at any price (HYAAP) tend to be favorites of those at or near retirement, particularly given the paltry payouts on fixed … Read more