A customer holds a can of Pepsi drink at a shopping mall on March 9, 2022 in Shaoxing, Zhejiang province of China.
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On Tuesday, PepsiCo raised its full-year revenue forecast as consumers ate more Doritos and drank more Gatorade last quarter, even as prices rose.
The company’s shares were up less than 1% in premarket trading.
Here’s what the company reported compared to what Wall Street expected, based on a survey of analysts by Refinitiv:
- Earnings per share: $1.86 adjusted vs. $1.74 expected
- Revenue: $20.23 billion vs. $19.51 billion expected
Pepsi reported second-quarter net income of $1.43 billion, or $1.03 per share, down from $2.36 billion, or $1.70 per share, a year earlier.
The company’s margins contracted as it faced higher freight and commodity costs in the quarter. Chief Executive Officer Ramon Laguarta said in prepared remarks that Pepsi is accelerating its cost management initiatives and using “mix and assortment solutions,” such as smaller sizes for its variety packages.
While higher costs weighed on its profits, the food and beverage giant saw a bigger hit from the Russia-Ukraine war. A $1.17 billion charge was reported for the quarter related to the conflict. As a result of the Kremlin’s invasion of the neighboring country last quarter, Pepsi said it was halting sales in Russia except for some essential items, such as baby formula. The company is now trying to discontinue or reposition some of its Russian juice and dairy brands.
Excluding items, the company earned $1.86 per share. Net sales rose 5.2% to $20.23 billion. Organic revenue, which strips out the impact of acquisitions and divestitures, rose 13% in the quarter.
Frito-Lay North America said organic revenue rose 14% as sales of Cheetos and Doritos rose, but volume, which excludes the impact of price or currency fluctuations, fell 2%. Laguarta said the division gained market share in the quarter.
The company’s North American beverage unit reported organic revenue growth of 9%, but volume fell 1%. Gatorade, Aquafina and Lifewtr posted double-digit growth in the quarter.
Quaker Foods North America, usually the laggard in Pepsi’s portfolio, was the only domestic segment to post volume growth for the quarter. Its organic revenue rose 18%, helped by double-digit growth in rice and pasta, oatmeal and biscuits. Its volume grew by 2%.
For 2022, Pepsi now expects organic revenue growth of 10%, up from its previous forecast of 8%. This marks the second consecutive quarter in which the company raised its revenue forecast without updating its earnings expectations. Pepsi still forecasts underlying constant currency earnings per share growth of 8%.
Laguarta said the company expects the North American business to be resilient and most of the international markets to be strong, despite macroeconomic and geopolitical instability.
Read the full earnings report here.
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