Benzinga's Money Mitch had the opportunity to catch up with Navellier & Associates founder and Chief Investment Officer Louis Navellier on Benzinga’s Stock Market Movers today. Navellier, who is routinely on Bloomberg, Fox News and CNBC, was on to speak about PepsiCo, Inc. (NASDAQ:PEP) earnings, which beat analyst consensus on both the top and bottom lines.
Here’s the Insight: Pepsi reported second-quarter sales growth of 5.2% year-over-year to $20.23 billion, beating the consensus of $19.51 billion, while adjusted EPS of $1.86 beat the analyst consensus of $1.74, according to data from Benzinga Pro.
- Net revenue from Frito-Lay North America increased 14% Y/Y
- Quaker Foods North America rose 17%
- PepsiCo Beverages North America fell 1%
- Latin America sales rose 23% Y/Y, and Europe sales declined 8%
- The gross profit increased 4.6% Y/Y to $10.8 billion, and the profit margin fell 35 basis points Y/Y to 53.4%
Related Link: PepsiCo: Q2 Earnings Insights
What Do You Think About These Results?
Everything looks really good, except for Europe said Navellier.
Europe sales were down, significantly. Now, the company raised guidance and implied that its organic growth is strong, so they don’t have to worry about currency. But, the drop in Europe sales adds to the currency risk, as you know the Euro is in parity with the [U.S.] dollar today.
How Do You Feel About Defensive [stocks] Coming Forward After Pepsi’s Report?
Clearly, the consumer is still spending. They want their chips and soft drinks. Pepsi’s international products are selling better than domestic products. It’s a good sign, we keep hearing that we’re in a recession — but, we keep creating jobs; we’re not in an earnings recession, earnings are still growing. Given that, year-over-year comparisons are becoming more difficult. So, Pepsi raising guidance today helped the entire market.
Is The Energy Trade Gone Or Just Stabilized?
Not at all. Energy stocks are going to have the best earnings for the next three quarters. So, what’s really going on is we are becoming energy independent again. We’re about 12.1 billion barrels per day, that's only 200,000 barrels per day less in 2019. OPEC didn’t produce quite as much as promised, but we’ll see if Biden can get them to nudge later this week in Saudi Arabia. But, demand is there.
We have demand down, we have supply up. But, energy is always in demand in the summer months. The real price break is going to come in September or October, but energy stocks are poised to have all the earnings.
I’m keenly aware of all of the profit-taking being done, but it is overdone.
Do You Feel The Fed Will Flip, And Do You See Signs Of Inflation Letting Up?
We’ve got CPI tomorrow; there’s been a lot of negative news, it’s going to be running close to 9%, et cetera ... but, the main thing is the core rate is falling. It’s been falling since March. It was 6.5% through May, [then] it was 6%, and its forecast will be 5.8% tomorrow.
The personal consumption expenditure index — which is what the Fed looks at — is running at 4.7% with the core rate. So, I’m confident that inflation is cooling off.
I do expect 75 basis points at this month's meeting, September’s meeting will be 50 or 75 basis points, then they’ll be in sync with market rates.
They’ve engineered the soft landing. We don’t have an earnings recession, we don’t have a jobs recession. It’s a very odd environment we’re in.
Where Can We Find Longer-term Opportunities With The Downtrend We’ve Had In The Markets?
We’re pretty washed out. When the three-month treasury, and the 10-year treasury invert from 50 days, what happens is that the markets wash out. It’s happened 17 times since 1971, and for the next 90 days, we’re going to be treading water for the overall indices.
We’ll pick up in October or so. Any stock that has great earnings will be fine. I’m loaded up on energy and fertilizers, I have plenty of food stocks and still have some shipping companies with low P/E and high dividends. It’s a narrow market, it's a stock-pickers market, but earnings do work. I’m looking forward to the next three weeks.
Benzinga’s Stock Market Movers, a daily show on Benzinga's YouTube channel, focuses on trading ideas, and covers the top stock market movers on any given day.
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