Jacob Brown
On Friday, PepsiCo revealed mixed quarterly results as North American need for its food and beverages weakened.
Market Response
In premarket trading, shares of Pepsi fell by more than 2% following the company’s release of its fourth-quarter earnings report.
Financial Performance
Pepsi reported adjusted earnings per share of $1.78, slightly beating Wall Street expectations of $1.72. However, revenue came in at $27.85 billion, missing analysts’ forecasts of $28.4 billion.
Quarterly Results
Fourth-quarter net income for Pepsi surged to $1.3 billion, or 94 cents per share, a significant increase from $518 million, or 37 cents per share, compared to the same period last year. Adjusted earnings per share, excluding items, were $1.78.
Revenue Decline
Quarterly net sales experienced a 0.5% decrease to $27.85 billion, marking the first decline in quarterly revenue since 2020. Currency exchange rates contributed to a 1.5% drag on net sales.
Factors Affecting Performance
Pepsi’s organic revenue, excluding acquisitions and divestitures, increased by 4.5% due to higher prices. However, elevated prices have negatively impacted demand for the company’s products, leading to a decline in volume.
Consumer Trends
High borrowing costs and reduced personal savings have constrained consumers’ spending, particularly in North America. Consumers are opting for smaller pack sizes for their affordability and convenience.
Segment Performance
Pepsi’s North American Quaker Foods division saw an 8% decline in volume, partly due to a voluntary recall of granola bars and cereals. Frito-Lay North America experienced a 2% drop in volume, while the North American beverage unit saw a 6% decline.
Outlook for 2024
Pepsi anticipates organic revenue growth of at least 4% and core constant currency earnings per share growth of at least 8% for 2024. This outlook is revised from previous forecasts, reflecting challenges in the market landscape.
Forward-Looking Statements
Pepsi executives foresee a weaker first half of the year due to product recalls in North America and international conflicts affecting sales. They expect international organic revenue growth to surpass that of North America for the full year.
