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Today’s Trading Edge: Pepsico shares unable to hold onto gains after Q3 earnings beat and raising guidance

Posted by WorldWideMarkets . on Sep 29, 2016 6:54:37 PM

WWM_PEP_SEP_29TH_2016.jpg

Pepsico Inc. (PEP) had better than expected earnings and raised their full-year guidance, as sales expect to grow in North America.  Pepsico shares had an initially strong daily advance as price rallied to a high of $109.71 before settling back around the $107.76 level. 

Pepsico reported a second quarter profit of $1.40 a share, analysts’ consensus eyed a $1.32. Revenue printed at $16.0 billion, in-line with the estimated range of $15.9 billion.  The company also affirmed its annual revenue growth at 4%.  The 2016 core earnings per share was raised from $4.71 to $4.78. 

CEO Indra Nooyi noted, “We  are  pleased  with  our  results  for  the  third  quarter  and  year  to  date.  We  are  executing  our strategy  well  and  managing  what  is  in  our  control.  Our product portfolio, geographic mix and capability centers are enabling us to deliver balanced revenue and productivity.   Based  on  our  year-to-date  performance  and  our  outlook  for  the  fourth quarter, we are raising our full-year core constant currency EPS growth objective.”

Price action on the PEP daily chart highlights the surge higher that occurred following the earnings beat.  The rally did form a bearish Gartley pattern and if we continue to see selling pressure, price could target the $106 region.  Currently price is trading above all three key (200-, 100- and 50-day) SMAs.  If bullish momentum returns, we could see priced target the $110 level. Longer-term upside targets remain the $125 zone.    

The Trade: Sell Pepsico shares at $108.50, with a stop loss of $109.50 and take profit of $105.50. The risk/reward ratio is 1:3   

Topics: Equities Market, Equities, US Stocks, EQUTI

 

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