Investors are looking forward to PepsiCo's (PEP 0.29%) upcoming first-quarter earnings report. In addition to a modest uptick in growth lately, Wall Street hopes are rising on the prospect that CEO Ramon Laguarta will bring positive changes to the snack and beverage businesses.

PepsiCo's report on Wednesday, April 17 will mark just the second full quarter for Laguarta as CEO of the consumer-foods giant, but investors already have a few concrete expectations against which to judge his executive team.

A glass of soda

Image source: Getty Images.

Winning market share

Pepsi's core beverage business showed signs of recovery in the second half of 2018, and investors will be looking for confirmation that the momentum is holding up. Sure, its 2% organic sales uptick trailed Coca-Cola's (KO 0.07%) 5% spike last quarter, but Pepsi's market-share trends improved significantly in 2018's final months.

While admitting there is "more work to do," Laguarta in February celebrated the fact that the sales boost outpaced management's expectations. Investors can judge the effectiveness of the latest growth initiatives by following global organic sales this week.

The snack business is an attractive area for management to focus on today, and not just because it delivers a huge chunk of Pepsi's profit gains. Executives see lots of ways to expand market share, such as with healthier snack products and more indulgent on-the-go options. Pepsi's Frito Lay business has also been held back by supply-chain issues in recent quarters, and fixing that problem should deliver a quick payoff in terms of faster sales growth.

Market-share wins in the snack and beverage segments will power steady organic sales gains of about 4% this year, according to management's last update, compared to a slight deceleration for Coca-Cola. Investors will learn this week whether the last few months changed that positive trajectory.

Profits and cash

Pepsi is predicting a slight drop in core earnings this year as it invests more in the business in preparation for a return to high-single-digit increases in fiscal 2020. The company is still targeting healthy cash flow of $9 billion, compared to Coke's $8 billion goal. 

Shareholders should see plenty of concrete returns from that cash haul in 2019. Pepsi is signaling that it won't make many major acquisitions like last year's SodaStream purchase, but instead will direct most of the excess funds right back to investors. In fact, Pepsi recently raised its dividend by 15% and announced plans to spend $3 billion on stock buybacks in 2019 compared to $2 billion in each of the last two years. That aggressive cash return plan is another way in which Pepsi stands out from its main beverage rival right now.

The outlook

Executives aren't likely to change their short-term outlook that calls for sales to rise 4% as profitability declines slightly in 2019. The mix of expected cash returns should hold steady, too, at about $5 billion through dividends and $3 billion from stock repurchases.

Those top- and bottom-line targets translate into underperformance when judged against Pepsi's long-term goals of growth around 5% and steadily rising operating margin. Yet as long as the company continues moving toward those targets while rewarding shareholders with growing cash returns, investors should give Laguarta plenty of flexibility to allow his rebound initiatives time to take hold.