PepsiCo Q1 Earnings Miss, Cuts FY25 EPS Forecast Amid Tariff Uncertainty

PepsiCo reported mixed Q1 2025 results, missing earnings expectations and trimming its full-year earnings forecast. The company's adjusted EPS was $1.48, below the consensus estimate of $1.49, and revenue declined 1.8% YoY to $17.92 billion. PepsiCo expects its core EPS for 2025 to fall by 3%, citing "volatility and uncertainty" amid rising tariffs. The company is taking proactive steps to manage supply chain costs and accelerating its shift toward natural ingredients.

PepsiCo (NASDAQ: PEP) reported mixed first-quarter (Q1) 2025 results, missing earnings expectations and trimming its full-year earnings forecast. The company's adjusted earnings per share (EPS) were $1.48, below the consensus estimate of $1.49, and revenue declined 1.8% year over year (YoY) to $17.92 billion. PepsiCo expects its core EPS for 2025 to fall by 3%, citing "volatility and uncertainty" amid rising tariffs. The company is taking proactive steps to manage supply chain costs and accelerating its shift toward natural ingredients.

Key highlights from the Q1 2025 results include:

- Revenue: Revenue declined 1.8% YoY to $17.92 billion, missing the Zacks consensus estimate of $17.76 billion. Organic revenue growth was 1%, with a 3% increase in effective net pricing offsetting a 2% decline in volume.
- EPS: Adjusted EPS of $1.48 fell short of the consensus estimate of $1.49, marking an 8.1% year-over-year decline in core EPS.
- Gross Margin: The core gross margin was flat YoY at 55.9%, while the gross profit declined 0.1% YoY to $9.99 billion.
- Operating Margin: The core operating margin contracted by 50 basis points (bps) to 15.8%.
- Segmental Performance: Revenue declines were observed in most operating segments, including a 1% decline in North America convenient food businesses (PFNA), a 2% decline in Europe, Middle East, and Africa (EMEA), and a 12% decline in Latin America Foods. The International Beverages Franchise (IB Franchise) segment reported a 3% increase in revenue.

PepsiCo's stock has been under pressure, losing 8% in the past three months compared to the industry's 11% growth. The company's dividend yield remains competitive with peers, but its high payout ratio leaves little room for error.

Looking ahead, PepsiCo expects continued volatility and uncertainty, particularly related to global trade developments, including tariffs. The company is taking proactive steps to manage supply chain costs and accelerating its shift toward natural ingredients.

References:
[1] https://www.ainvest.com/news/pepsico-q1-2025-earnings-navigating-subdued-sentiment-strategic-shifts-2504/
[2] https://www.theglobeandmail.com/investing/markets/stocks/PEP/pressreleases/32039288/pepsico-q1-earnings-revenues-miss-tariff-woes-hurt-eps-view/

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