PURCHASE, N.Y. — PepsiCo today reported fiscal third-quarter earnings that exceeded Wall Street’s estimates, driven by strength in its international business. The company’s North America business lagged, however, with volumes down 2% at its beverage unit and flat in the food division.
“Our business in North America performed below our expectations and represents a meaningful opportunity for improvement,” CEO Ramon Laguarta said in a statement.
PepsiCo plans to increase brand investment, pursue cost reductions and evaluate refranchising and operating changes to improve execution and margins.
Pepsi lowered its earnings forecast, citing margin pressures stemming from higher input costs, an unfavorable product mix, expiring commodity-hedge benefits and the loss of a tariff-related benefit.
The company now expects core earnings per share to increase 2.5% to 3.5%, down from 5% to 7%. Its revised forecast foresees net revenue growth of about 6%, on the high end of its earlier forecast of between 4% and 6%.
Organic revenue increased 3.1% in the third quarter, with international operations delivering 8% growth amid gains across global food and beverage volumes.
PepsiCo posted per-share earnings of $2.34 in the period on revenue of $25.2 billion, with both metrics above analysts’ consensus.
The company reported volume growth of 3% for its beverages and 1% for its food for the quarter. Volume excludes pricing and currency fluctuations to more accurately reflect demand.
Functional hydration, zero-sugar drinks lift sales
Its North American beverage unit – which includes its namesake soda and Gatorade – benefitted from strength of its functional hydration and zero-sugar drinks.
The North American convenient foods business, which includes brands like and Quaker Oats, saw its organic revenue improve sequentially.
Laguarta said the company’s moves earlier this year to lower prices on many of its snacks – along with an emphasis on simpler ingredients and functional benefits like protein and fiber – provided a boost in the latest quarter.
“We’re happy with the turnaround in the [snacks] volume performance,” he said. “If you think about last year, that business was low single-digit negative volume growth. This year, we’re low single-digit positive growth.”
PepsiCo had expected even higher growth in snack volumes in the quarter, he said, but sales were hampered by weak consumer sentiment. Inflation’s persistence is forcing company executives to consider tactics to keep prices affordable for shoppers.
