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PepsiCo Results ‘Zonked’ by Taxes, Guilfoyle Says

Stock represents a defensive play, but there are other approaches besides just buying shares.

PepsiCo  (PEP) - Get PepsiCo, Inc. Report the giant soda and snack manufacturer, reported an increase in sales during the third quarter, but results were hit by tax provisions, Real Money’s Stephen “Sarge” Guifoyle argues.

The company reported an increase in sales across the board, including North America, Europe, Latin America, Africa, the Middle East and Asia for revenue growth of 11.6%. Organic growth rose by 9% during the three month period.

PepsiCo reported adjusted EPS of $1.79 on revenue of $20.19 billion, beating Wall Street’s estimates. However, GAAP earnings fell to $1.60 from $1.65 a year earlier.

PepsiCo got “Zonked” by taxes, Guilfoyle wrote on Real Money. The company’s “provision for income taxes for Q3 2021 hit the tape at $802 million, up from $526 million for Q3 2020. This is a 52.4% increase.”

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PepsiCo increased its guidance for organic revenue growth of 8%, an increase from its prior guidance of 6%. The company also estimates 12% core (or adjusted) EPS growth and 11% in constant currency.

Investors should weigh their risk strategy before buying shares, Guilfoyle wrote.

The stock is a defensive style name and shareholders receive a 2.86% yield “just to hang around,” he wrote. “There will be at least a bit of allocation rotation in PEP's favor as markets continue to be rattled by a number of potentially negative inputs.” So, “if straight equity is your game, you could do worse than PEP,” he wrote.

However, “For me, the $145 PEP puts expiring November 19th that will pay me almost $2 looks more attractive than laying out $150+ for a stock that I don't think will go up that much unless it sells off further first.”

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