PepsiCo, Inc. (PEP) on Q1 2023 Results - Earnings Call Transcript

Operator: Good morning, and welcome to PepsiCo's 2023 First Quarter Earnings Question-and-Answer session. . Today's call is being recorded and will be archived at www.pepsico.com. It is now my pleasure to introduce Mr. Ravi Pamnani, Senior Vice President of Investor Relations. Mr. Pamnani, you may begin. Ravi Pamnani: Thank you, operator. I hope everyone has had a chance this morning to review our press release and prepared remarks, both of which are available on our website. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans and updated 2023 guidance. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, April 25, 2023, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our first quarter 2023 earnings release and Form 10-Q available on pepsico.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. Joining me today are PepsiCo's Chairman and CEO, Ramon Laguarta; and PepsiCo's Vice Chairman and CFO, Hugh Johnston. We ask that you please limit yourself to one question. And with that, I will turn it over to the operator for the first question. Operator: . Our first question comes from Dara Mohsenian with Morgan Stanley. Dara Mohsenian: So very impressive price mix result in the quarter at 16%. Can you just give us an update on the competitive environment you're seeing in your key business segments and geographies, both in terms of just price increases but also promotion and if that's picking back up to more normalized levels? And if that favorable environment is continuing. And just as you look going forward, obviously, very strong levels of pricing, how do you think about the of that back to more normalized levels going forward the next few quarters and the ability of volume to recover as that pricing dissipates on a year-over-year basis? Ramon Laguarta: Yes. Thank you, Dara. Let me cover that and then Hugh can add some comments. We're seeing a competitive environment. We're all trying to protect the health of the categories and then make sure that our brands are participating in those categories in a competitive way. We are investing in our innovation, investing in our brands, investing obviously in value in different ways, pricing, sizing in mostly. So we're seeing a good positive competitive environment in the U.S., in Europe, and also in our developing markets consistently across the world. When it comes to pricing, as we said earlier in February, we have mostly taken the pricing already this year that we needed to cover for our cost increases. And that is where we stand at this point. We're seeing a deceleration of inflation, not a reduction of cost, but a deceleration of inflation. And we think that with the pricing that we've taken already most of our business around the world, that should be sufficient. Obviously, there are some markets, highly inflationary markets around the world where we might have to take additional pricing. If you think about Argentina, Turkey, Egypt though those kind of markets where the currencies are suffering, but the majority of our pricing is already done. Hugh Johnston: Yes. And the only thing I'd add to that, Dara, as a reminder, you know we tend to buy commodities 9 to 12 months out. So to the degree that the rate of inflation decreases, and it will be a decrease in the rate of inflation, not deflation, by any stretch of imagination that's going to happen very slowly over the course of '23. I think that's more of a '24 thing to the degree it happens even then. Operator: Our next question comes from Andrea Teixeira with JPMorgan. Andrea Teixeira: I wanted to go back to a little bit of what you spoke in the prepared remarks that you were -- and you also on an earlier interview Hugh that you gave, that you're not seeing the fact that inflation is still high throughout the 6 to 9 months that you're seeing here. And it doesn't look like you're seeing the need for promotional environment, but more in the context of what has happened in LatAm, I think it's the only region that you haven't seen a reacceleration and every other region, you've seen an acceleration. And I'm seeing -- I'm talking -- I'm asking this question more of the point of strength rather than a point of weakness. Of course, it's really hard not to like the numbers here. Just thinking of how to think of the volume decline you saw in snacks and to think about how to parse it out or it's more about the comparison getting tougher? Hugh Johnston: Yes, Andrea. A couple of things. Just for clarity, in terms of the snack food or the community food volume, Pioneer was a big driver of that. There are challenges with the power grid down in South Africa. And obviously, Pioneer makes a lot of heavy products. Ex-Pioneer Snacks volume was basically flat for the quarter and beverages obviously was up a small amount for the quarter. In terms more broadly of sort of the rate of growth of all of the businesses. From a revenue standpoint, I think generally speaking, you see the consumer continuing to buy our products. Elasticities are still holding up quite well across most of the globe. And then despite the fact that we're taking pricing driven by the inflation that we're facing into. In terms of operating performance, I think what you're seeing more than anything is a reflection of the productivity initiatives that we've put into place, whether they be automation in the supply chain or digitalization across the company, we're leveraging global business services. So when we talk about sort of an acceleration in the operating income performance, I think it's a consumer that's responding to the brand advertising we're doing. And in addition to that, the productivity that we're driving. Operator: Our next question comes from Kevin Grundy with Jefferies. Kevin Grundy: Great. Just picking up on some of your prior commentary there. And just the decision to raise the EPS guidance at this juncture of the year, which I think is noteworthy because the company's delivery against guidance has historically been quite good, as you're well aware, but historically, the tax has been to maintain it and then as the year moves on to edge it higher. So I -- just some context here. Was it that the first quarter was that good relative to your expectations, just came in that much better? Because it's noteworthy within the context of all the prognostication around potential recession and market volatility for the raise at this juncture of the year, so maybe just some historical context around it and relative to the first quarter results, I think, would be helpful. Ramon Laguarta: Yes, Kevin. I think you're right. Your assessment is right. We're seeing both better elasticities than some of the worst-case scenarios we were planning for. And also, we're seeing the teams delivering better productivity. So we're seeing the -- in general, the flow of materials, the availability of labor, transportation, all those elements that were making us a suboptimal company if you just to call it somehow in terms of operating metrics, that's getting better, which is giving us the opportunity to improve some of the metrics in our operations faster than what we thought. So it's both an improvement in productivity on the cost side and better elasticity. I think the commercial programs were strong. You saw that we've increased A&M again in the first quarter. And I think the commercial plan, the innovation plans are very strong. So we feel comfortable that even -- and we always play out a lot of scenarios before we give a -- give you guys a guidance. We feel comfortable that even at this early point in the year, we can raise our top line and bottom line estimates. Operator: Our next question comes from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I had a question on organic revenue growth at PBNA. Your price mix in the quarter was incredibly impressive, but your volumes were down slightly again. So could you touch on where you're primarily pressure. And then maybe what you're seeing from the consumer. Also, it seems that incremental pricing may be a bit harder to come by and promotional levels may need to increase in beverages this year. So could you touch on that as well as maybe your key initiatives to stabilize or turn your volume trends around that PBNA -- is your Pepsi rebranding or the new logo and visual identity for the brand, one of those key initiatives, for instance? Ramon Laguarta: Thank you, Bonnie. We don't see -- actually, we see the momentum in the beverage category, very strong in terms of demand. We're seeing away from home, very strong. We're seeing the convenience channel, very strong, and we're seeing most of the in-home channels also quite strong. So we don't feel that there is a competitive environment that is getting worse in beverages. There's some one-off in the first quarter because we're -- as you know, we're moving Gatorade from a warehouse system to a DSD system and in that transition, there is some inventory reduction overall in the system that is impacting Q1. But we don't think that the competitive environment in beverages in the U.S. is getting worse and that we need to do anything special. We have a very strong commercial program, both innovation, brands, commercial execution and customer programs. So that will be the way we're planning to continue to compete vigorously in the market. Operator: Our next question comes from Lauren Lieberman with Barclays. Lauren Lieberman: Great. So you've already been asked about raising the guidance early in the year, and it would sort of be mechanically hard not to, given how strong the quarter was. But your prior outlook you had baked in what we thought was one of the more conservative set of assumptions around the macro environment at least for the second half of the year across our coverage anyway. And so I was just curious if you're seeing anything more recently that has you more optimistic on the macro trajectory. Anything in terms of that broader market outlook or consumer outlook that's informing your ability to raise the guidance? Or is it really more tied to just the momentum in your own business? Ramon Laguarta: Yes, Lauren, it's mostly related to the fact that we're already 1/3 of the year is passed, and we have better information on our costs and everything else that complex operating. There are a few things we're still concerned about. One is where is the consumer going to be in second half of the year. We continue to be -- have multiple scenarios. And some of the scenarios are more optimistic, some best, and we continue to have various scenarios. The second one, geopolitics and that might impact the business, and therefore, we want to be cautious there as well. And the third one, as I mentioned earlier, there are some currencies in some emerging and developing markets that we don't know where some of those markets will go in the second half of the year. And we also want to make sure that we have the right financial scenarios around those options. So those are the three variables that could define where the business goes. As I said earlier, operationally, the business is better. We're seeing better labor availability, better flow of materials, suppliers are obviously getting better as well. Transportation is getting better. So operationally, the business is in a better place than it was in 2022. Operator: Next question comes from Bryan Spillane with Bank of America. Bryan Spillane: Hugh, I wanted to ask about accounts payable. Just it was a pretty meaningful shift year-over-year. I understand there's a sequential or a seasonal piece to it. But I think it's up more than $1 billion versus the first quarter last year. So is that tied to the Gatorade DSD distribution change? Or I don't know, if there is something else going on with accounts payables that just is driving such a meaningful change? Hugh Johnston: Yes. Bryan, it's really two things. One is a seasonal inventory build on the Gatorade thing, as you mentioned. The second is, we've got a number of significant capital projects that are in flight right now and the timing of the payables on the capital equipment is what drove that number. So I would take it as a one-off, not a change in trend by any stretch of the imagination. It's just a one-off when the quarter ended. Operator: Our next question comes from Chris Carey with Wells Fargo. Christopher Carey: Can you maybe just touch on how investment and priorities will evolve in 2023. I think one of the key takeaways from 2022 was distribution costs between shipping, handling and merchandising activity was a key driver of SG&A inflation, but I'm conscious of double-digit increases with added marketing spending out of the gates into Q1. So can you maybe just frame how overall investment will be evolving over the course of this year in the context, maybe some easing on inflation and certain SG&A buckets and an ability to put more spending in others. Ramon Laguarta: Yes, Chris. Listen, I think the framework of investment is similar to what we expressed in the past. We mean #1 priority for us is to make sure that our categories remain highly visible in consumers' minds in a complex consumer choices environment. And our brands do very well in those categories. So that's priority number one, make sure that we continue to be a preferred brand with our consumers. Second, we continue to invest in transformation of the business, digitalization and productivity at the center of the strategy systems. We've been investing on that for quite a while. That continues to be an enabler of all the data strategy that we have in the business. And those are the two big projects, we continue to invest in capacity. There is good volume growth across many of our markets around the world, and that continues to be a priority in enabling the brands to continue to grow. So those are the principles. I don't know, Hugh, if there's anything else. Hugh Johnston: No, I think that's the only thing -- and I think where Chris is going with the question from his perspective as well. Chris, I think you'll see more of the financial impact of those investments in SG&A significantly less selling cost of goods. So as you're modeling it out, SG&A is a place where you'll see all the items that Ramon referenced will be hitting. Operator: Our next question comes from Peter Grom with UBS. Peter Grom: So I was hoping to get more color on the international performance in the quarter. But maybe specifically in China. I know it was called out in the prepared remarks is a market where you gained share, and maybe I missed this, but I don't think it was mentioned when discussing growth in the quarter. So can you maybe share a view on the current environment in China how that evolved through the quarter and kind of how you see that progressing from here? Ramon Laguarta: Yes. Yes, we're seeing, obviously, in China, a optimism in consumers and optimism in the customers and that's driving volume for us across the -- across both our food and our beverage business. The organic share, especially in snacks. Snacks has been performing very well through the pandemic and continues to outgrow the category. And in beverages as well, we're seen competing quite well in Colas and sports hydration. So yes, obviously, this is going to be a tailwind for us as the year progresses both in away from home and in-home consumption. Operator: Our next question comes from Robert Ottenstein with Evercore ISI. Robert Ottenstein: Great. Given the strong start to the year and your confidence in the year, I thought I'd ask a longer-term question. And that is, as you look at the categories that you're in, over time in the past, you've expanded in certain countries a little bit outside of beverages and snacks either for reasons of scale or growth opportunities or maybe that's just what was available as part of an acquisition. Over the next, call it, next 5 years or so, do you believe that you're in the right categories to drive your algorithm? Or do you see potentially the need or desirability to expand and do some adjacent areas. And given the advances that you've made in IT and logistics, perhaps that's even a greater opportunity than in the past? Ramon Laguarta: It's a great question. Listen, we believe our categories are large and growing at a very fast pace, around 5% globally. I think our main responsibility is to maintain the innovation and make sure that the portfolio evolves with consumers, the brands continue to be super relevant. And that is where we want to focus our efforts. We're making some small moves, as you saw, for example, when we're going into low alcohol here in the U.S., expanding the brands. We're making small moves like Cheetos going into Mac and Cheese. So we're expanding some of our brands organically into some new spaces that make sense from the consumer point of view that we believe our categories are large, global, healthy, and we -- our responsibility is to give them healthy and growing very fast. Operator: Our next question comes from Vivien Azer with Cowen. Vivien Azer: I wanted to ask about Pepsi Zero Sugar given the reformulation and the broad-based international distribution. Can you offer some perspective on how that's performing relative to expectations? And as well, could you possibly update us on how the organization is tracking towards your 2025 ESG target to drive 60, 70% of volumes from lower added sugar beverages? Ramon Laguarta: Great question. And it's essential to our strategy, continue to drive low sugar and nonsugar products as kind of the portfolio transformation. In the case of Pepsi, obviously, that is very relevant for us given the size and scale of Pepsi brand for us. The relaunch in the U.S. with a new formula is very -- it's been very well received by consumers based on our early data of repeats and preferences. The brand is growing 60%, if I remember correctly, in the first quarter, and that's driven a little bit by distribution, but it's mostly velocity. So clearly, the consumers are -- they like the product and they're coming back to the product. Globally, we also see big growth of the nonsugar segment in the category 2, 3x, the average of the category in most of the markets. And we are driving that growth along with some of our key competitors. I think it's a strategy that is working and it's keeping the category very relevant for consumers. We'll continue to invest in nonsugar as a driver of growth for our brands. Operator: Our next question comes from Gerald Pascarelli with Wedbush. Gerald Pascarelli: In U.S. measured channels for salty snacks, we've seen private label products gained share of the overall category for the past few months now. This has obviously have seen in tandem with very strong performance and market share gains for Frito as well, which is great. But I was just curious if you've seen any near-term changes, some broad consumer purchase patterns in this category relative to maybe a few months ago? Any thoughts there would be helpful. Ramon Laguarta: Yes. In general, we're seeing private label growth in some of the categories where we participate, especially waters, juices that we used to participate in some categories in salty snacks as well as you mentioned. As you will say, Frito-Lay is -- I think it's growing share of market at the fastest pace that we've seen in the last, maybe 10 years, if I recall, as a consequence of the great work the team is doing in terms of execution, but mostly innovation and brand building. So I think we see both private label increasing, although from a very low base in salty snacks. But most importantly for us, we're seeing our brands continue to gain loyalty, expand their consumer base and be preferred in that segment. But yes, private label is slowly increasing and in -- from a very, very low base as I said, in some subsegments of the salty snacks business. Operator: Our next question comes from Brett Cooper with Consumer Edge. Brett Cooper: With about a year in of and Hard Mountain dew, I was hoping you could provide some color on your view of the performance of the brand and the operation to date, any learnings? And then how you think about proceeding from here? Ramon Laguarta: Yes. Listen, we're happy with the learnings that we're taking, both in the operation of this category, which is new to us and also in how we create consumer demand and consumer loyalty, and we continue to find partners to create new solutions for consumers with our brands. We just launched a tea version, a hard tea version with Lipton and FIFCO Company. They developed a great product, which we're going to start distributing through our system in the next few weeks. So we're going to go into the summer with 2 main products, Mountain Dew -- Hard Mountain Dew and Hard Lipton. As I said, our intention is not to build a large portfolio of products and complex portfolio, but is to focus on a few good brands developed with strategic partners and then leverage our distribution capabilities to give it to consumers all across the country. That's our journey. We're not rushing. We're going at a speed that we learn and we make this business solid with the right margins and the right consumer propositions. Operator: Our next question comes from Filippo Falorni with Citi. Filippo Falorni: Question on the Pepsi Beverage North America business. It seems clearly this year, you're making a lot of investments. The Pepsi Logo change, the Starry launch, a lot of other launches, with expansion of Pepsi Zero Sugar and Hard Mountain Dew. Just bigger picture, what are your expectations from kind of a market share standpoint in the business? What would you consider a success for this year? And then secondly, how do you balance these investments that you're making with your target of getting back to a mid-teens margin for the business? Ramon Laguarta: Yes. I mean we've expressed this in the past. We want to have a business that grows and the category pace or above and expand its margins to the mid-teens levels that we have mentioned as well in the next 2 to 3 years. So that is the strategic intent for this business. I think the team is executing very well. The way we measure our share is full LRB. So it's the full set of brands that we have in our portfolio, not just small segments within the category. And obviously, I think we're progressing well against that growth target for the year, whilst also expanding the margins for the business. We feel good about the margin expansion this year. Operator: Our last question comes from Charlie Higgs with Redburn. Charlie Higgs: I was just wondering if you could talk a little bit more about the Frito-Lay North America division and the volume growth there. How did Lays, Doritos, Cheetos perform? Is there any color you can give on a single-serve pack versus multi-packs? And then just how you see the very strong margin growth in Q1 progressing throughout the year would be useful. Ramon Laguarta: Yes. Great. Listen, as I said earlier, Frito-Lay, I think, it's in the U.S. and -- but also the whole snack business globally is doing extremely well. But if we focus on the U.S., I think the team is doing a fantastic job growing the large brands, as you mentioned, Lays, Doritos, Ruffles, Tostitos, Cheetos. And at the same time, building peripheral brands that cover some spaces that we're not covering with the big brands. Let's call it, PopCorners or SunChips . We're really building a portfolio of brands that covers different cohorts and different need stays in a unique way. We're also innovating in new formats. You mentioned multipack, which has been a great hit for us in terms of variety and empowering consumers for personalization. But this year, a few months ago, we launched Minis, which is also an incredible innovation. If you think about the convenient -- the additional convenience it gives consumers and putting our best brands in that format opens a whole set of new occasions for the business. So we feel very good about the innovation strategy and how we keep capturing new occasions into our brands. As I said earlier, I think the business is becoming better operationally as the supply of materials is getting better, labor availability is getting better. So we should see operational metrics improving, and that's what you're seeing in the margins, although the Q1 margin was a little bit elevated. The strategic intent with Frito-Lay is growing it very, very fast and keeping the margins at those high levels because that's super accretive for the PepsiCo overall business. Okay. I think this is the last question. So really appreciate the conversation this morning, and thank you, everyone, for joining today and especially for the confidence that you're all placed in our company and the investments you're making in our company. Thank you very much, and have a great day. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
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Related Analysis

PepsiCo (NASDAQ:PEP) Maintains "Overweight" Rating by J.P. Morgan

  • J.P. Morgan reaffirms an "Overweight" rating for PepsiCo (NASDAQ:PEP), indicating a positive outlook on the stock.
  • PepsiCo offers an attractive dividend yield of over 4%, showcasing a strong commitment to shareholder returns with a 53-year growth streak in dividends.
  • The company's market capitalization stands at approximately $183.43 billion, reflecting its significant market presence and long-term growth potential.

On April 29, 2025, J.P. Morgan maintained its "Overweight" rating for PepsiCo (NASDAQ:PEP), with the recommendation being a hold. At the time, the stock price was $133.76. PepsiCo is a global leader in the salty snacks and non-alcoholic beverages sector, competing with companies like Coca-Cola and Nestlé.

PepsiCo offers an attractive dividend yield of over 4%, which is appealing to income-focused investors. The company has a remarkable 53-year growth streak in dividends, indicating a strong commitment to returning value to shareholders. Despite a slightly higher-than-ideal payout ratio, PepsiCo is expected to continue its dividend growth.

The stock price of PEP is currently $133.76, showing a minor change of $0.38, or 0.28%. Today, the stock has fluctuated between $133.11 and $135.41. Over the past year, PEP has seen a high of $183.41 and a low of $131.80, reflecting some volatility in its trading range.

PepsiCo's market capitalization stands at approximately $183.43 billion, highlighting its significant presence in the market. The company continues to demonstrate strong long-term growth and market leadership through robust advertising, marketing, and strategic acquisitions, despite challenges like tariffs and economic uncertainty.

Today's trading volume for PEP is 8,489,020 shares on the NASDAQ exchange. This level of activity indicates a healthy interest in the stock, as investors weigh the company's strong fundamentals against broader market conditions.

PepsiCo (NASDAQ:PEP) Maintains "Overweight" Rating by J.P. Morgan

  • J.P. Morgan reaffirms an "Overweight" rating for PepsiCo (NASDAQ:PEP), indicating a positive outlook on the stock.
  • PepsiCo offers an attractive dividend yield of over 4%, showcasing a strong commitment to shareholder returns with a 53-year growth streak in dividends.
  • The company's market capitalization stands at approximately $183.43 billion, reflecting its significant market presence and long-term growth potential.

On April 29, 2025, J.P. Morgan maintained its "Overweight" rating for PepsiCo (NASDAQ:PEP), with the recommendation being a hold. At the time, the stock price was $133.76. PepsiCo is a global leader in the salty snacks and non-alcoholic beverages sector, competing with companies like Coca-Cola and Nestlé.

PepsiCo offers an attractive dividend yield of over 4%, which is appealing to income-focused investors. The company has a remarkable 53-year growth streak in dividends, indicating a strong commitment to returning value to shareholders. Despite a slightly higher-than-ideal payout ratio, PepsiCo is expected to continue its dividend growth.

The stock price of PEP is currently $133.76, showing a minor change of $0.38, or 0.28%. Today, the stock has fluctuated between $133.11 and $135.41. Over the past year, PEP has seen a high of $183.41 and a low of $131.80, reflecting some volatility in its trading range.

PepsiCo's market capitalization stands at approximately $183.43 billion, highlighting its significant presence in the market. The company continues to demonstrate strong long-term growth and market leadership through robust advertising, marketing, and strategic acquisitions, despite challenges like tariffs and economic uncertainty.

Today's trading volume for PEP is 8,489,020 shares on the NASDAQ exchange. This level of activity indicates a healthy interest in the stock, as investors weigh the company's strong fundamentals against broader market conditions.

PepsiCo (NASDAQ:PEP) Price Target and Financial Performance Review

On April 24, 2025, Robert Ottenstein from Evercore ISI set a price target of $140 for PepsiCo (NASDAQ:PEP). At the time, the stock was trading at $135.31, indicating a potential increase of about 3.47% to reach the target. This target was revised down from a previous $155, as highlighted by TheFly. PepsiCo, a global leader in the food and beverage industry, faces competition from companies like Coca-Cola and Nestlé.

PepsiCo's first-quarter earnings and revenues have fallen short of expectations. The company is grappling with rising trade-related costs and macroeconomic uncertainty, which are expected to further increase supply-chain expenses. Despite these challenges, PepsiCo shows resilience in navigating global issues. The company has revised its full-year profit forecast downward due to increased supply chain costs driven by tariffs and a challenging consumer environment.

In its first-quarter earnings report, PepsiCo announced that it now anticipates constant currency earnings per share to remain flat compared to the previous year. This is a reduction from its earlier prediction of mid-single-digit growth. Despite this, PepsiCo still expects a low-single-digit rise in organic revenue. CEO Ramon Laguarta commented on the situation, highlighting the expected increase in supply chain costs due to global trade developments.

PepsiCo reported a 1.8% decline in revenue for the first quarter, totaling $17.92 billion, which surpassed Wall Street's expectations of $17.73 billion. However, the adjusted earnings per share of $1.48 fell short of the anticipated $1.50. The current price of PEP is $135.31, reflecting a decrease of 4.89% or $6.95. Today, the stock has fluctuated between a low of $134.53 and a high of $141.85.

Over the past year, PEP has reached a high of $183.41 and a low of $134.53. The company's market capitalization stands at approximately $185.55 billion. The trading volume for PEP is 15.50 million shares on the NASDAQ exchange. Despite the challenges, PepsiCo remains a significant player in the market, continuing to adapt to the evolving economic landscape.

PepsiCo (NASDAQ:PEP) Price Target and Financial Performance Review

On April 24, 2025, Robert Ottenstein from Evercore ISI set a price target of $140 for PepsiCo (NASDAQ:PEP). At the time, the stock was trading at $135.31, indicating a potential increase of about 3.47% to reach the target. This target was revised down from a previous $155, as highlighted by TheFly. PepsiCo, a global leader in the food and beverage industry, faces competition from companies like Coca-Cola and Nestlé.

PepsiCo's first-quarter earnings and revenues have fallen short of expectations. The company is grappling with rising trade-related costs and macroeconomic uncertainty, which are expected to further increase supply-chain expenses. Despite these challenges, PepsiCo shows resilience in navigating global issues. The company has revised its full-year profit forecast downward due to increased supply chain costs driven by tariffs and a challenging consumer environment.

In its first-quarter earnings report, PepsiCo announced that it now anticipates constant currency earnings per share to remain flat compared to the previous year. This is a reduction from its earlier prediction of mid-single-digit growth. Despite this, PepsiCo still expects a low-single-digit rise in organic revenue. CEO Ramon Laguarta commented on the situation, highlighting the expected increase in supply chain costs due to global trade developments.

PepsiCo reported a 1.8% decline in revenue for the first quarter, totaling $17.92 billion, which surpassed Wall Street's expectations of $17.73 billion. However, the adjusted earnings per share of $1.48 fell short of the anticipated $1.50. The current price of PEP is $135.31, reflecting a decrease of 4.89% or $6.95. Today, the stock has fluctuated between a low of $134.53 and a high of $141.85.

Over the past year, PEP has reached a high of $183.41 and a low of $134.53. The company's market capitalization stands at approximately $185.55 billion. The trading volume for PEP is 15.50 million shares on the NASDAQ exchange. Despite the challenges, PepsiCo remains a significant player in the market, continuing to adapt to the evolving economic landscape.

Barclays Downgrades PepsiCo to Equalweight, Cites Near-Term Uncertainty in Snack Division

PepsiCo (NASDAQ:PEP) received a downgrade from Overweight to Equalweight by Barclays analysts, who lowered the price target to $156 from $168, citing near-term headwinds in the company’s Frito-Lay North America (FLNA) division.

As the market increasingly views PepsiCo as more of a U.S. food company, investor sentiment is closely tied to FLNA’s volume recovery. Barclays anticipates that it may take several more quarters before trends stabilize, particularly amid a more uncertain macroeconomic environment.

Despite the short-term struggles, the firm still sees FLNA capable of achieving sustainable volume growth of approximately 1.5% and organic sales growth (OSG) of around 3% over the long run. Beyond this division’s recovery, Barclays believes PepsiCo’s sales growth of 4-6% and profit growth of 7-9% remains achievable over the long term—though likely at the lower end of that range.

PepsiCo’s current valuation in the high-teens multiple reflects a balanced risk-reward outlook, according to Barclays. While FLNA’s near-term softness adds caution, the company’s strong international business and productivity initiatives help mitigate downside risk, supporting a baseline of 4% sales growth and 7% EPS growth in the long run.

Barclays Downgrades PepsiCo to Equalweight, Cites Near-Term Uncertainty in Snack Division

PepsiCo (NASDAQ:PEP) received a downgrade from Overweight to Equalweight by Barclays analysts, who lowered the price target to $156 from $168, citing near-term headwinds in the company’s Frito-Lay North America (FLNA) division.

As the market increasingly views PepsiCo as more of a U.S. food company, investor sentiment is closely tied to FLNA’s volume recovery. Barclays anticipates that it may take several more quarters before trends stabilize, particularly amid a more uncertain macroeconomic environment.

Despite the short-term struggles, the firm still sees FLNA capable of achieving sustainable volume growth of approximately 1.5% and organic sales growth (OSG) of around 3% over the long run. Beyond this division’s recovery, Barclays believes PepsiCo’s sales growth of 4-6% and profit growth of 7-9% remains achievable over the long term—though likely at the lower end of that range.

PepsiCo’s current valuation in the high-teens multiple reflects a balanced risk-reward outlook, according to Barclays. While FLNA’s near-term softness adds caution, the company’s strong international business and productivity initiatives help mitigate downside risk, supporting a baseline of 4% sales growth and 7% EPS growth in the long run.

PepsiCo, Inc. (NASDAQ:PEP) Earnings Report Overview

  • Earnings Per Share (EPS) Growth: PepsiCo reported an EPS of $1.96, surpassing the Zacks Consensus Estimate and showing growth from the previous year's $1.78.
  • Revenue Shortfall: Despite the EPS beat, PepsiCo's revenue of $27.78 billion fell short of the estimated $27.89 billion, indicating a decline in demand in North America.
  • Financial Health Indicators: The company's financial metrics, including a P/E ratio of 21.10 and a debt-to-equity ratio of 2.31, highlight its market valuation and financial leverage.

PepsiCo, Inc. (NASDAQ:PEP) is a global food and beverage leader known for its diverse product portfolio, including brands like Pepsi, Mountain Dew, Lay's, and Quaker. The company competes with other giants like Coca-Cola and Nestlé. On February 4, 2025, PepsiCo reported earnings per share (EPS) of $1.96, slightly above the estimated $1.95, indicating a positive earnings performance.

The reported EPS of $1.96 not only surpassed the Zacks Consensus Estimate but also showed growth from the previous year's $1.78 per share. This growth highlights PepsiCo's ability to enhance its profitability over the past year, despite facing challenges in its key North American market. However, the company's revenue of $27.78 billion fell short of the estimated $27.89 billion, as highlighted by CNBC.

The shortfall in revenue is attributed to a decline in demand for PepsiCo's snacks and drinks in North America, its largest market. This decline poses a challenge for the company, as it navigates changing consumer preferences. As reported by Reuters, PepsiCo has projected its annual profit to fall below market expectations due to this weak demand.

PepsiCo's financial metrics provide further insight into its market valuation and financial health. With a price-to-earnings (P/E) ratio of 21.10, the market values its earnings relatively high. The price-to-sales ratio of 2.15 and enterprise value to sales ratio of 2.56 reflect the value investors place on its revenue and total worth. The company's debt-to-equity ratio of 2.31 indicates significant financial leverage, while a current ratio of 0.89 suggests a tight short-term liquidity position.