Pepsi’s (NYSE:PEP) status as a bedrock beverage and snack food seller usually makes it a favorite stock for investors during tough economic times. But its shares have underperformed so far in 2020, along with those of rival Coca-Cola (NYSE:KO), thanks to the COVID-19 pandemic.
Drinking occasions for brands like Pepsi and Gatorade have plummeted due to the postponement of sporting events, concerts, and most other large social gatherings. That sets up a potentially painful earnings report from the company later this month. Yet shareholders are also due to receive some positive updates in areas like direct cash returns on July 13, when Pepsi announces its results and looks ahead to the second half of fiscal 2020.
Let’s take a closer look.
The spring selling months
Pepsi’s last announcement showed strong growth, with organic sales jumping 8% as core earnings expanded 10%. That report covered only through mid-March, though, and so it captured almost none of the social distancing efforts that clamped down on the U.S. economy at that time.
Coca-Cola’s report included an additional week of demand data, and those results might be more useful for investors. The soda giant said sales volumes dove 25% during the first few weeks of April as consumers stayed closer to home. Pepsi might see a similarly sharp drop in its beverage business in markets like the U.S., Latin America, and Europe.