PepsiCo’s quarterly sales and profit beat Wall Street’s expectations, driven by growth outside the United States. But the company has lowered its earnings forecast for the year, admitting that its business at home is recovering more slowly than planned.

PepsiCo reported quarterly earnings and revenue that beat analysts’ expectations on Thursday, October 8, but lowered its profit forecast for the year, CNBC reported.

Its international business is growing, while its home market in North America continues to lag.

The Results

  • Adjusted earnings per share: $2.34, against $2.29 expected
  • Revenue: $25.27 billion, against $24.96 billion expected
  • Net sales growth: 5.6 percent
  • Organic revenue growth: 3.1 percent
  • Net income: $3.05 billion, or $2.23 a share, up from $2.6 billion, or $1.90 a share, a year earlier

The estimates are from a survey of analysts by LSEG, as cited by CNBC. Shares rose about 2 percent in morning trading.

The Forecast Cut

PepsiCo now expects core earnings per share to grow by 2.5 to 3.5 percent this year. It had previously pointed to the low end of a range of 5 to 7 percent.

On sales the picture is better. The company expects net revenue growth of about 6 percent, the top of its earlier range of 4 to 6 percent.

Abroad: Growth

International markets were again the strongest part of the business. They have accounted for 41 percent of net revenue so far this year, chief executive Ramon Laguarta said.

Volumes grew in all but one of the company’s international units. Across the group, beverage volumes rose 3 percent and food volumes 1 percent.

At Home: A Slow Turnaround

“Our business in North America performed below our expectations and represents a meaningful opportunity for improvement,” Laguarta said.

The North American beverage unit saw volumes fall 2 percent, while the food division’s volumes were flat. Chief financial officer Steve Schmitt said the turnaround is moving more slowly than expected.

In February, PepsiCo cut prices by as much as 15 percent on many of its snacks, including Lay’s and Doritos, after budget-conscious shoppers had begun to skip them. Laguarta said that had worked, with snack volumes moving from a small decline last year to a small increase this year.

Soft drinks were the bigger disappointment. CNBC reported that PepsiCo’s carbonated drinks lagged behind the overall category, including rival Coca-Cola.

Prices May Rise Again

PepsiCo executives said they expect “a new wave of inflation” caused by higher energy prices.

Laguarta said the company would use “revenue management tactics”, a phrase that usually means price increases, while keeping “guardrails” so that retailers do not price its snacks too high for shoppers.

The company also plans cost reductions to pay for investment in new products and marketing.

Image: Pepsi cans (file photo, 2017). Photo by Grizzlybear.se via Wikimedia Commons, CC0.