PepsiCo Shares Up on Beat and Raised Outlook

PEP

Shares in carbonated drinks and snacks manufacturer PepsiCo are up this morning after the company beat on its revenue and earnings estimates for the third quarter and raised its outlook for the fiscal year. Pepsi’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 12%, after raising the guidance to 10% growth in the last earnings report three months ago.

Shares were last up 4.1% after the company reported core earnings per share of $1.97 versus the $1.83 expected by Wall Street. Earnings also grew 10% from the third quarter of last year. Net revenue similarly beat the average estimate of $20.82 billion coming in at $21.97 billion, up 8.8% year over year. Pepsi’s food division was especially strong in North America with Frito-Lay posting revenue of $5.56 billion and Quaker Foods of $713 million, beating estimates by 5.3% and 4.2%, respectively.

The North American beverages division, the largest at Pepsi, posted quarterly revenue of $6.64 billion against estimates of $6.37 billion. European revenue also crushed expectations of $3.35 billion, coming in at $3.65 billion. Latin America for a second quarter running posted the largest percentage beat of 9.1% across the company’s various segments, posting sales of $2.52 billion versus the $2.3 billion expected. Revenue from the Africa, Middle East and South Asia regions likewise impressed, with the actual figure of $1.73 billion beating estimates of $1.66 billion.

Pepsi’s organic revenue grew 16% year over year, higher than the 9.1% estimate. The company defines “organic revenue” as “a measure that adjusts for the impacts of foreign exchange translation, acquisitions, divestitures and other structural changes.” Chief Executive Officer Ramon Laguarta previously said that he expects a 2% foreign exchange translation headwind to impact reported net revenue and core EPS growth. The CEO also mentioned today that despite moribund unit volume growth, Pepsi has been able to raise prices without experiencing any drop in demand from its consumers.

The company’s business momentum continued despite macroeconomic and geopolitical volatility. Pepsi is also expanding its presence into energy drinks, taking a $550 million stake in Celsius Holdings in August, and launching Gatorade FastTwitch a month later. Chief Financial Officer Hugh Johnston said management is maintaining a portfolio of energy drink brands because the market is highly segmented. Lastly, the company said it expects to report adjusted core earnings per share of $6.73 for the fiscal year. Wall Street was expecting a core EPS of $6.68, while management had previously guided to $6.63.

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