PepsiCo’s quarterly earnings report for this quarter exceeded analysts’ expectations, with both earnings per share and revenue beating Wall Street estimates. Despite facing challenges such as weaker U.S. demand due to Quaker Oats recalls and backlash from higher prices on its products, the company managed to deliver solid results. However, the market response was not as positive, as shares of PepsiCo fell more than 2% in morning trading.
In the first quarter, PepsiCo reported a net income attributable to the company of $2.04 billion, or $1.48 per share, up from $1.93 billion, or $1.40 per share, in the same period last year. The company’s adjusted earnings per share were $1.61, surpassing the $1.52 expected by analysts. Revenue also saw growth, reaching $18.25 billion, compared to the expected $18.07 billion. Despite these positive numbers, PepsiCo’s volume continued to experience pressure, with its food division seeing a decrease of 0.5% and its beverage segment reporting flat volume.
One of the key challenges faced by PepsiCo was the Quaker Oats recalls, which negatively impacted the company’s volume. The North American Quaker Food division reported a staggering 22% decrease in volume, with the recall affecting Pepsi’s organic volume by approximately 1%. This issue was further exacerbated by the recall widening in January, leading to a significant drop in demand for Quaker Foods cereals and bars.
Despite facing challenges in the U.S. market, PepsiCo saw stronger demand in international markets. The Asia-Pacific, Australia, New Zealand, and China region reported a 12% increase in volume for snacks, indicating growing popularity among consumers in that region. In Europe, beverage volume increased by 7% and snack volume rose by 2%, demonstrating resilience in the face of higher grocery prices.
PepsiCo reiterated its 2024 outlook, expecting organic revenue to rise by at least 4% and core constant currency earnings per share to climb by at least 8%. The company’s executives emphasized the importance of targeting lower-income consumers in the U.S. market and focusing on maintaining customer loyalty, particularly for popular snack products like Cheetos. PepsiCo aims to navigate the changing market landscape and normalize category growth rates in the coming years.
While PepsiCo’s quarterly earnings report showed positive financial results, the company faces ongoing challenges in the U.S. market and must continue to adapt its strategies to sustain growth in the face of consumer behavior changes and market dynamics.