PepsiCo Kicks the Earnings Ball by Reporting Moderately Upbeat Numbers, Wary of Inflation

PepsiCo (PEP) shares pushed higher after the beverage giant posted a strong earnings result for the second quarter and raised its full-year sales forecast.

PepsiCo posted $1.86 per share, $0.12 above the analyst consensus alongside $20.23 billion in revenue, pushing past the $19.51 billion expected by Wall Street. The strong results were posted despite pressure from inflation, persistent supply chain issues, a 3% foreign currency impact, and losses due to the geopolitical fallouts. Sales for Frito-Lay North America in particular helped buoy the company’s quarterly results.

However, core operating profits grew at a slower pace than organic sales at the company's Frito Lay North America (the one above mentioned), Quaker Foods North America, and North America Beverages businesses. PepsiCo's Africa, Middle East and Asia business was a bright spot with organic sales increasing 21% and operating profits rising 18%.

For FY2022, the company expects a 10% increase in organic revenue vs. prior outlook growth of 8% provided core annual effective tax rate is 20%; Total cash payout to shareholders of approximately $7.7 billion, comprised of dividends of $6.2 billion and share buybacks of $1.5 billion; core earnings per share of $6.63 vs. consensus of $6.66.

Ramon Laguarta, PepsiCo’s Chairman and CEO said during the conference call that “we're all concerned in a way about the high inflation and how that's going to impact. Especially as we look at the full consumer universe, the lower part of the income pyramid, that's where we're all looking more carefully. And we're making decisions on entry point in the categories and how do we continue to have that particular consumer engaged in our categories.”