PepsiCo Posts Lower Sales Than Expected for Third Straight Quarter

PepsiCo (PEP) reported lower-than-expected sales for the third consecutive quarter, with revenue missing analysts' estimates by $27.91 billion, down from $27.85 billion in the same period last year. The snack food and beverage giant's net income came in at $1.52 billion, or $1.11 per share, up slightly from $1.3 billion a year ago but well below the $2.61 billion, or $1.90 per share, consensus estimate from Visible Alpha. After adjusting for one-time costs, PepsiCo recorded an adjusted net income of $2.69 billion and $1.96 per share, two cents better than expected.



Sales declined across the North American segments of the company's snack food companies, Frito-Lay and Quaker Foods, while the volume of its beverage sales declined 3% year-over-year. Those declines were offset by growth in the company's international divisions. Looking ahead to 2025, PepsiCo said it expects a low-single digit increase in organic revenue, along with a mid-single digit increase in adjusted EPS. The company also announced a 5% bump to its full-year dividend to $5.69 per share, up from $5.42 per share previously.

PepsiCo's earnings report comes on the heels of a challenging consumer environment and geopolitical tensions, which have impacted the company's ability to maintain its growth trajectory. The company's executives, including Chairman and CEO Ramon Laguarta, expressed optimism about long-term category growth, bolstered by Gen Z's increasing snacking habits, which favor mini meals over large meals. However, the company is facing short-term pressures, including inflationary pressures and softer consumer markets in some regions.

To navigate these challenges, PepsiCo is focusing on strategic investments in productivity and brand value, as well as demand generation budget optimization. The company aims to maintain EPS growth at 8% for 2025, while expecting category growth to exceed 1%. Additionally, PepsiCo is investing in brand events and value offerings for its Frito-Lay segment in the U.S. to drive volume growth, with notable investments planned for Doritos and Tostitos during the fall season.

In conclusion, PepsiCo's lower-than-expected sales for the third straight quarter highlight the challenges the company faces in a rapidly changing consumer environment and geopolitical landscape. However, the company remains optimistic about its long-term growth prospects and is taking proactive measures to address these challenges. By focusing on productivity, brand value, and demand generation, PepsiCo aims to maintain its competitive edge and continue to deliver value to its shareholders.