PepsiCo on Thursday reported quarterly earnings and revenue that topped analysts’ expectations, as the company projected that weak North American demand will rebound as strategy changes take hold.
Executives shared more details on the quarterly conference call about how Pepsi plans to boost its brands, lean into healthier snacking trends and cut costs.
CEO Ramon Laguarta said the company will hit the low-end of its long-term organic revenue growth goal of 4% to 6% “in the next few quarters” due to those efforts.
Shares of the company rose more than 6% in morning trading.
Here’s what Pepsi reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $2.12 adjusted vs. $2.03 expected
- Revenue: $22.73 billion vs. $22.27 billion expected
Pepsi reported second-quarter net income attributable to the company of $1.26 billion, or 92 cents per share, down from $3.08 billion, or $2.23 per share, a year earlier.
Excluding restructuring and impairment charges and other items, the company earned $2.12 per share.
Net sales rose 1% to $22.73 billion. Pepsi’s organic revenue, which excludes acquisitions, divestitures and foreign currency, increased 2.1% during the quarter.
But the company is still seeing softer demand for its products. Pepsi’s worldwide volume fell 1.5% for its food and was flat for its drinks. The metric strips out pricing and foreign exchange changes.
Volume dropped again in North America, although CEO Ramon Laguarta said in a statement that the domestic business is improving. The company’s North American food division, which includes both Frito-Lay and Quaker Foods, saw its volume shrink 1%.
Pepsi’s domestic drinks segment reported that its volume fell 2% in the quarter, although its namesake soda was one bright spot. Executives said in prepared remarks that volume for Pepsi rose during the quarter, and Pepsi Zero Sugar saw double-digit volume growth.
As part of Pepsi’s strategy to boost its North American sales, it’s leaning into the protein craze and multicultural product offerings, like those from Siete Foods and Sabra. Pepsi is also planning on relaunching Lay’s and Tostitos to focus more on their core ingredients: potatoes and corn. The company is also working on ensuring better in-store availability and placement of its products.
Pepsi is also cutting costs and trying to improve its profit margins. The company closed two manufacturing plants for its North American food business during the quarter. Pepsi also said it is trying to make its transportation and logistics more efficient.
The company added it is evaluating how it spends its marketing dollars to make sure it is getting the best return on its investment. And Pepsi is also looking for any overlap between its North American food and beverage businesses to cut down on duplication and better integrate the two divisions.
Pepsi reiterated its full-year outlook. It still expects its core constant currency earnings per share to be roughly unchanged from the prior year and organic revenue to grow by a low single-digit percentage.
Last quarter, the company cut its earnings forecast, citing new tariffs, economic volatility and a more cautious consumer.
