If you’ve ever tucked into a packet of Frito-Lay potato chips while watching a movie at home or refreshed yourself with a can of Gatorade after a gym workout, you would be enjoying one of the myriad brands and products offered by PepsiCo . The food and beverage giant owns a multitude of brands that it has built up steadily over the years. Its flagship product, Pepsi, is a brand name you’ll see in countless restaurants and supermarkets.
The coronavirus pandemic has, however, hurt a swath of food and beverage companies, as cafes and restaurants have been forced to temporarily shut around the globe due to lockdowns and movement restrictions. As more people work from home and commute less, they also pay fewer visits to food establishments, thus depressing the sales of many food companies.
Investors will rightly wonder if PepsiCo’s business has been adversely affected and if growth may have stalled for the company. Does its stock still qualify as a buy?
Resilience in the face of adversity
PepsiCo’s recently announced third-quarter earnings showed that the company remains resilient even in the face of economic adversity. During the quarter, revenue rose 5.3% year over year while net income increased by 9.1% year over year. The company also saw its gross profit margin expand marginally in the first nine months of the year, inching up from 55.3% to 55.4%. What’s more, PepsiCo continued to generate healthy free cash flow of $4 billion during the first nine months, up from $3 billion generated in the same period last year. This is an impressive achievement considering that food and beverage demand was hit badly during this crisis.
