PepsiCo Shares Surge 6% After Strong Quarterly Results, Signalling Potential Rebound

PepsiCo's stock climbed over 6% following the release of its latest quarterly earnings, indicating the start of a recovery after two years of underperformance.

Key Financial Highlights:

• EPS: $2.12 (Bloomberg consensus: $2.03; Prior year: $2.28)

• Revenue: $22.73 billion (+1% YoY, Expected: $22.32 billion)

• Organic Revenue: +2.1% (Forecast: +1.15%)

Segment Performance:

• Foods North America: $6.47 billion (Forecast: $6.37 billion)

• Latin America Foods: $2.55 billion (Forecast: $2.53 billion)

• EMEA: $4.54 billion (Forecast: $4.33 billion)

• International Beverages Franchise: $1.37 billion (Forecast: $1.36 billion)

• Asia Pacific: $1.00 billion (Forecast: $999.4 million)

• PepsiCo Beverages North America:

  • Revenue: $6.80 billion (Prior year: $6.81 billion; Forecast: $6.78 billion)

  • Organic Revenue: +1% (Forecast: -0.5%)

Full-Year 2025 Outlook:

• Expected Growth: Low single-digit organic revenue growth anticipated year-on-year.

• EPS (Core, Constant Currency): Projected to be broadly in line with the previous year.

• Effective Tax Rate: Approximately 20%.

• Cash Return to Shareholders: Around $8.6 billion (Dividends: $7.6 billion, Buybacks: $1.0 billion).

• FX Headwind: -1.5 percentage points impact on reported revenue and EPS (previously -3 percentage points).

• Implied Core EPS for 2025: Approximately 1.5% decrease, an improvement from the previously assumed -3% (Core EPS 2024: $8.16).

Commentary on Results:

The company experienced its largest single-session share price increase of over 6% since March 2020. While still expecting a year-on-year decline in profits, the results suggest an improving trajectory for the company. Management highlighted progress in cost optimization projects in North America and indicated plans for further investment. Analysts in the US commented that these results could mark a turning point for PepsiCo.

During the press conference, CEO Ramon Laguarta emphasized PepsiCo's commitment to better aligning with evolving consumer expectations regarding health, naturalness, and convenience. The company is focusing on product development, particularly in the snacks and high-protein beverage segments, and expanding its offering of smaller packaging sizes to cater to modern consumer habits. PepsiCo also plans to reformulate products with more natural ingredients, including a shift to more natural oils and an increased range of low-sugar options. Commenting on changes among competitors, Laguarta stressed that PepsiCo would follow consumer preferences for sugar levels and natural ingredients, stating, "If the customer wants it, they will get it."

These initiatives are a strategic response to the long-term trend of consumers shifting towards healthier products and the growth of private labels. PepsiCo anticipates that product innovation and agile responses to market demands will help maintain positive momentum in international markets and improve its position in the crucial American market. The board reaffirmed its full-year guidance, despite cost pressures, including those related to tariffs, and maintained its shareholder payout strategy.

Currently, Bloomberg reports 8 "buy" recommendations, 17 "hold," and 1 "sell" for PepsiCo. The company's stock had fallen by over a third from its 2023 peak but has since rebounded by more than 13% from its local trough, reaching its highest level since late April.