PepsiCo Shares Up on Beat and Raised Outlook

Ticker Symbol: PEP

Shares in carbonated drinks and snacks manufacturer PepsiCo are up slightly this morning after the company beat its revenue and earnings estimates for the second quarter and raised its outlook for the fiscal year. The company’s management also said that demand for its products remains robust despite rising prices and a broader promotion-driven environment in retail sales. Management raised its organic revenue expectation for fiscal 2022 to be up 10%, after raising the guidance to 8% growth in the last earnings report three months ago.

The company reported core earnings per share of $1.86 versus the $1.74 expected by Wall Street. Net revenue also beat the average estimate of $19.55 billion coming in at $20.23 billion, up 5.2% year over year. Pepsi’s food division was especially strong in North America with Frito-Lay posting revenue of $5.18 billion and Quaker Foods of $675 million, beating estimates by 2% and 5%, respectively. The sales beat at Frito-Lay was especially impressive given that results were weighed down by a production glitch at the hummus-producing Sabra plant.

The North American beverages division, the largest at the company, posted quarterly revenue of $6.12 billion against estimates of $6 billion. European revenue, however, only met expectations at $3.02 billion. Latin America posted the largest percentage beat of 12.5% across the company’s various segments, posting sales of $2.42 billion versus the $2.15 billion expected. Revenue from the Asia Pacific, Australia, and New Zealand regions was the only disappointment, with the actual figure of $1.12 billion missing estimates of $1.14 billion.

Chief Executive Officer Ramon Laguarta said that the company expects a 2% foreign exchange translation headwind to impact reported net revenue and core EPS growth. The company’s business momentum continued despite macroeconomic and geopolitical volatility. Pepsi did take a $1.4 billion charge during the quarter due in part to impairments taken because of the Russia-Ukraine conflict. The company said it expects to report adjusted core earnings per share of $6.63 for the fiscal year.

Unit volume increases at the beverage giant were not as impressive as those of overall revenue, indicating that the company is boosting top-line growth primarily by increasing prices on its products. Chief Financial Officer Hugh Johnston said the company boosted prices by an average of 12% year over year across all segments.

Shares in PepsiCo are flat for the year relative to the 19% drop in the S&P 500. Investors are currently favoring consumer staple stocks given their stable financials and lower valuations relative to the technology and consumer discretionary sectors.

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