PepsiCo on Thursday reported quarterly profits and revenues that beat analysts’ expectations, with international growth offsetting another quarter of lower volumes in North America.
Shares of the company rose more than 2% in morning trading.
Here’s what the company reported for its fiscal third quarter versus what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $2.29 adjusted vs. $2.26 expected
- Income: $23.94 billion versus $23.83 billion expected
Pepsi reported third-quarter net income attributable to the company of $2.6 billion, or $1.90 per share, down from $2.93 billion, or $2.13 per share, a year earlier.
Excluding restructuring and impairment charges and other items, Pepsi earned $2.29 per share.
Net sales rose 2.6% to $23.94 billion. Excluding acquisitions, divestitures and foreign exchange, Pepsi’s organic revenue increased 1.3% in the quarter.
However, the owner of Frito-Lay and Gatorade is still seeing lower demand for its products. Pepsi’s global food and beverage volume fell 1% in the quarter. The measure eliminates price and exchange rate fluctuations.
CEO Ramon Laguarta said during the company’s conference call that volume was also lower as Pepsi moved to smaller package sizes to attract price-conscious consumers. Although this change hurts volume, it increases revenue.
Pepsi has notably struggled in its home market in recent quarters, leading the company to reinvest in its brands and explore cost-cutting measures.
“We also expect our North America business to generate improved growth and profitability trends as we aggressively reduce costs, accelerate innovation and further refine our pricing architecture initiatives,” executives said in prepared remarks.
Pepsi Foods North America, which includes brands like Doritos, Quaker Oats and Pearl Milling, reported that its volume fell 4% during the fiscal third quarter. The company has invested in more “authoritative” snack offerings, like Stacy’s pita chips and Quaker rice cakes. It offers more snack options, like Doritos Protein, which aims to take advantage of consumers’ shift toward protein-rich foods.
Pepsi also unveiled new packaging for Lay’s chips that highlighted its lack of artificial colors and flavors, and pledged to launch “NKD” Doritos and Cheetos, which will use no synthetic colors or flavors. Pepsi and other brands have decided to remove these ingredients, in part under pressure from the Trump administration.
Similarly, Pepsi plans to use more olive and avocado oils in its snacks; The Make America Healthy Again movement has vilified canola oil and other seed oils, despite a lack of scientific evidence.
The company has also tried to attract price-conscious consumers by making its multipacks and single-serve snacks cheaper.
Improving the performance of the North American food segment “is a top priority for the company,” executives said.
Pepsi’s North American beverage unit saw volume decline 3%, although Laguarta noted “improving momentum” in the business. The company’s namesake soda grew in both volume and revenue during the quarter, while new acquisition Poppi saw its year-to-date retail sales climb more than 50% compared to the same period last year, executives said.
In September, Pepsi sold its stake in Rockstar Energy in the United States and Canada to compete with the energy drink maker. Celsius. The drinks giant owns an 11% stake in Celsius.
The same month, activist investor Elliott Investment Management revealed a $4 billion stake in Pepsi. In a presentation and letter sent to the company’s board of directors, Elliott called for a number of changes, including a possible refranchising of its North American bottling network and a reinvestment in its soda brands. Laguarta said during the company’s conference call that Pepsi and Elliott shared a belief that the company was undervalued.
“We’re going to have conversations in the coming weeks and months,” Laguarta said.
The company also reiterated its outlook for the full year. It still expects its constant-currency earnings per share to be roughly flat from a year earlier and its organic revenue to increase by a low single-digit percentage.
Pepsi also announced Thursday that Chief Financial Officer Jamie Caulfield plans to retire. Walmart American financial director Steve Schmitt will succeed him from November 10.