Cramer on PepsiCo’s stock move following an earnings beat

CNBC’s Jim Cramer said Wednesday that as earnings season begins, it’s wise to keep in mind that sometimes bad news is baked into a stock’s price ahead of the report.

Cramer showed Wall Street’s reaction to PepsiCo around and following his report on Tuesday. He noted that the stock fell, but managed to recover, although the company posted a revenue miss.

“This is something to keep in mind as we head into earnings season: If a stock has already sold off heavily in the quarter, it’s very difficult for it to continue to decline unless the numbers are shockingly horrible,” he said. “Nothing shocking about PepsiCo.”

Cramer pointed out that PepsiCo was hit by “an avalanche of negative research” entering the quarter, with analysts from Morgan Stanley, Read, Bank of AmericaRBC Capital and Barclays voicing their concerns, with some worried about poor sales.

While the snack and beverage maker missed on revenue, it managed to beat earnings expectations. The company cut its full-year forecast for organic revenue, citing weak demand in North America as shoppers buy fewer snacks. PepsiCo also reported a decline in overseas volumes and felt the repercussions of a recall of its Quaker Oats products.

Although the stock posted losses in the days leading up to the report, it crept back again and ended Tuesday’s session up 1.92%, according to FactSet. Cramer found some bright spots in the quarter that he said were significant, including the company’s focus on providing better value for items like potato chips and efforts to expand its portfolio to include healthier options.

“Stocks react to expectations, and when it comes to PepsiCo, everyone was expecting a very bad quarter, which is why the stock sold off so hard on the report,” Cramer said. “But once I saw the numbers and heard the commentary, it was bad with … a few bright spots that allowed PepsiCo to rally very nicely anyway.”

PepsiCo did not immediately respond to a request for comment.