Pepsi raises revenue outlook after earnings beat, but stock falls as beverage sales slow

However, the company’s North American beverage unit saw its growth moderate during the quarter. Pepsi shares fell less than 1% in premarket trading.

Executives said supply chain disruptions and inflationary pressure for labor, commodities and transportation weighed on its fiscal third-quarter results.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $1.79 adjusted vs. $1.73 expected
Revenue: $20.19 billion vs. $19.39 billion expected
For the quarter ended Sept. 4, net income fell to $2.22 billion, or $1.60 per share, from $2.29 billion, or $1.65 per share, a year earlier.

Excluding items, the food and beverage giant earned $1.79 per share, topping the $1.73 per share expected by analysts surveyed by Refinitiv.

Net sales rose 11.6% to $20.19 billion, beating expectations of $19.39 billion. The company’s organic revenue, which strips out the impact of acquisitions and divestitures, climbed 9% in the quarter.

Pepsi’s North American beverage business reported organic revenue growth of 7% for the quarter. While the unit’s organic sales have risen 10% on a two-year basis, growth has moderated since bouncing back 21% in the prior quarter. The company said that it saw double-digit net revenue growth for its food service business, which includes sales to restaurants, stadiums and college campuses.

Frito-Lay saw its organic revenue increase by 5% as consumers maintained many of their pandemic snacking habits. Pepsi said that it gained market share in the salty and savory snack categories during the quarter.

Quaker Foods North America, which has been the most challenged of Pepsi’s business units, saw its organic revenue increase by 1%. It was the only segment to report shrinking volume, which excludes the impact of price changes, and reported the largest drop in operating profit.

For the full year, Pepsi said it expects its organic revenue to increase by 8%, up from its prior forecast of 6% growth. The company reiterated its forecast for core constant currency earnings per share of 11% growth. Analysts were forecasting full-year earnings growth of 13% and a revenue increase of 9.5%.

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