PepsiCo reported earnings this morning
🥤In the face of falling demand for its beverages and food products, PepsiCo raised guidance for the rest of the year and exceeded analysts’ expectations for quarterly earnings and revenue, with EPS $2.09 adjusted vs. $1.96 expected and $1.86 for the same quarter last year; revenue was $22.32 billion vs. $21.73 billion expected.
💵Earnings were aided by Pepsi’s ability to maintain a positive inflation adjusted pricing strategy in the face of mostly negative volume growth, especially a -4.5% decline in North American beverages, a -5% decline in Quaker Foods, and a decline in emerging market convenience snacks.
💰Gross margins improved because of increased productivity from investments in digitization, automation, and standardization on a global scale. Through the rest of the year, margins should benefit from easing supply chains, continued throughput efficiency improvements, and better pricing. But the risk of softening consumer demand or to put it another way, consumers looking for better deals and straying to other brands, is rising along with prices; that is something to watch carefully!
⚡Consumers and investors will also be looking for product innovation across Pepsi’s brands, but especially amongst their energy drinks like CELSIUS Holdings, Inc., Rockstar Energy Drink, and Gatorade Energy. Interestingly, Pepsi’s investment cycles and spend tend to be weighted more towards the second half of the year once they have a better sense for how the year will turn out from an earnings perspective.
⚠Recent news pertaining to aspartame’s possible negative health effects may factor into investor’s long-term outlook since much of their sales growth comes from low-calorie and zero-calorie drinks.
I want it all. I want the Pepsi endorsement. I want the arena shows. I want Times Square!
Betty Who, Australian-American musician, singer and songwriter
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-23-67
