PepsiCo announced its quarterly earnings and revenue on Tuesday, surpassing analysts’ expectations despite facing challenges such as a recall of certain Quaker Foods cereal and bars that impacted U.S. volume.
In premarket trading, the company’s shares experienced a slight decrease of less than 1%.
Here’s a breakdown of the company’s performance compared to Wall Street’s expectations, according to a survey of analysts by LSEG:
- Earnings per share: $1.61 adjusted versus the expected $1.52
- Revenue: $18.25 billion compared to the anticipated $18.07 billion
PepsiCo reported a first-quarter net income attributable to the company of $2.04 billion, or $1.48 per share, showing an increase from $1.93 billion, or $1.40 per share, in the previous year. Adjusted for items, Pepsi’s earnings per share stood at $1.61.
Net sales grew by 2.3% to reach $18.25 billion. Organic revenue, which excludes factors like acquisitions, divestitures, and foreign exchange, also saw a rise of 2.7% during the quarter.
However, the company’s volume remained under pressure, a trend observed across many of its competitors. Pepsi witnessed a decline in volume, attributed to higher prices for products like Gatorade and Fritos.
The food division experienced a 0.5% decrease in volume, while the beverage segment reported flat volume. These figures account for changes in pricing and currency to reflect actual demand.
The recall of Quaker Foods cereals and bars further exacerbated Pepsi’s volume challenges. The company initiated a recall due to potential salmonella contamination in December, expanding it in January. Consequently, the North American Quaker Food division recorded a significant 22% decline in volume for the quarter, with the Quaker Foods recall contributing to a roughly 1% reduction in Pepsi’s organic volume.
Pepsi plans to close a Quaker Oats plant associated with the recalls in June, although production has already ceased. Limited production of certain affected products has resumed, according to Pepsi.
Volume declines were also observed in other North American divisions, with a 5% decrease in the beverage unit and a 2% decline in Frito-Lay North America’s volume.
On a positive note, demand outside the U.S. showed strength. The Asia Pacific, Australia, New Zealand, and China region reported a 12% increase in snack volume. Even in Europe, where grocery prices have been a challenge, beverage volume grew by 7%, while snack volume rose by 2%.
Pepsi reaffirmed its 2024 outlook, anticipating organic revenue growth of at least 4% for the full year and a minimum 8% increase in core constant currency earnings per share.
Looking forward, Pepsi executives stated,
“As we look ahead, we continue to expect a normalization and moderation in category growth rates versus the last few years. We also continue to expect that consumers will remain watchful with their budgets and choiceful with their purchases.”
