Today's stock market
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Consumer stocks rose on optimism over earnings; the Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP) jumped 1.2%. Bank stocks fell, with the SPDR S&P Regional Banking ETF (NYSEMKT:KRE) slipping 1.1%.
PepsiCo stock gets some fizz
PepsiCo reported fiscal second-quarter earnings that beat expectations and shareholders were rewarded with a 4.8% increase in the stock price. Revenue grew 2.4% to $16.09 billion, slightly ahead of the $16.04 billion analyst consensus. Earnings per share fell 13% to $1.28, but what PepsiCo calls "core" earnings, a non-GAAP measure, came in at $1.61, well above the $1.52 Wall Street was expecting. In constant currency, core EPS grew 7% from the period a year earlier.
PepsiCo's results reflected growth in its snack business, growth in international markets, and some sequential improvement in its North America beverage business. Frito Lay North America had a 4% increase in revenue and a 5% jump in operating profit. Latin America organic revenue growth was 3.5%, Europe and sub-Sahara Africa grew 7%, and Asia, Middle East and North Africa was up 6%. The North America Beverage segment had a 1% sales decline, which was an improvement on last quarter's 2% drop. Gross margin contracted 20 basis points, also improving on the 110-point drop in Q1.
"The majority of our businesses performed very well, particularly our international divisions propelled by continued growth in developing and emerging markets, and our North America Beverages sector posted sequential net revenue and operating profit performance improvement," said CEO Indra Nooyi.
PepsiCo reaffirmed previous guidance of full-year organic sales growth of 2.3% and core EPS growth of 9%, and that outlook, in the face of challenging shifts in domestic consumer behavior and commodity inflation, was enough to give the stock a pop today.
Nordstrom falls on downgrade
Apparel retailer Nordstrom held its annual investor day today, but the company's vision for the future failed to inspire, and an analyst downgraded the stock, which finished down 2.7%. KeyBanc Capital Markets downgraded shares from overweight to sector weight.
Not helping Nordstrom's cause was full-year guidance for net sales between $15.2 billion and $15.4 billion, slightly above the $15.1 billion in sales last year. That outlook shouldn't have been any surprise since it was unchanged from the figures the company projected in May, but analysts had convinced themselves in the meantime that the company would do $15.8 billion.
Longer term, Nordstrom expects sales to grow 3% to 4% annually from 2017 through 2022, and earnings before interest and taxes (EBIT) to grow at an annual rate of between 5% and 6%. EBIT margin is expected to grow from 6.1% in 2017 to between 6.6% and 6.9% in 2022.
Nordstrom's strategy depends in part on its "Nordstrom Local" concept, which are stores that have no inventory. Customers visit the stores for services such as tailoring or manicures, but order the clothes online for same-day pick-up at the store. The first Nordstrom Local opened in October, and yesterday the company announced plans to open two new locations in the Los Angeles area.