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PepsiCo (PEP) Q2 2022 earnings beat Wall Street estimates


A customer holds a can of Pepsi beverage at a shopping center on March 9, 2022 in Shaoxing, Zhejiang Province of China.

VCG | Getty Images

PepsiCo on Tuesday raised its revenue outlook for the yr, as inflation pushed up prices and other people paid more for its Doritos chips and Gatorade drinks

Expecting costs to rise even higher within the second half of the yr, the worldwide foods and drinks giant said it plans to maintain shrinking product sizes and deploying other ways to administer rising expenses.

“We face inflation like everyone else, and we predict that’s going to persist for some time, but we’re taking enough pricing to have the opportunity to administer the inflation, and our focus is absolutely rather more on how can we drive costs out of the business,” Hugh Johnston, PepsiCo’s chief financial officer, said on CNBC’s “Squawk Box.”

Shares of the corporate rose lower than 1% in premarket trading.

Here’s what the corporate reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.86 adjusted vs. $1.74 expected
  • Revenue: $20.23 billion vs. $19.51 billion expected

Pepsi reported second-quarter net income of $1.43 billion, or $1.03 per share, down from $2.36 billion, or $1.70 per share, a yr earlier.

The corporate’s margins shrank because it faced higher freight and commodity costs throughout the quarter. CEO Ramon Laguarta said in prepared remarks that Pepsi is accelerating its cost management initiatives and using “mix and assortment solutions,” like smaller sizes for its variety packs. Johnston said the corporate may sometimes select to cut back the variety of chips in a bag slightly than hike prices.

While higher costs weighed on its profits, PepsiCo saw a bigger hit from the Russia-Ukraine war. It reported a $1.17 billion charge for the quarter related to the conflict. Within the wake of the Kremlin’s invasion of the neighboring country last quarter, Pepsi said it was pausing sales in Russia apart from some essential items, like baby formula. The corporate is now attempting to discontinue or reposition a few of its Russian juice and dairy brands.

Excluding items, the corporate earned $1.86 per share. Net sales rose 5% to $20.23 billion. Organic revenue, which strips out the impact of acquisitions and divestitures, climbed 13%.

Frito-Lay North America’s organic revenue rose 14% as sales of Cheetos and Doritos grew. But volume, which excludes the impact of pricing or currency fluctuation, declined 2%. Laguarta said the division gained market share throughout the quarter.

The corporate’s North American beverage unit saw organic revenue growth of 9%, but its volume fell 1%. Gatorade, Aquafina and Lifewtr saw double-digit growth within the quarter.

Quaker Foods North America, often the laggard of Pepsi’s portfolio, was the one domestic segment to report volume growth. Its organic revenue climbed 18%, helped by double-digit growth in rice and pasta, oatmeal and cookies. Volume rose 2%.

For 2022, Pepsi now expects organic revenue growth of 10%, up from its prior forecast of 8%. This marks the second consecutive quarter that the corporate hiked its revenue forecast without updating its earnings guidance. Pepsi still expects core constant currency earnings per share growth of 8%.

Laguarta said the corporate expects that the North American business can be resilient and most of its international markets can be strong, despite macroeconomic and geopolitical volatility.

Read the total earnings report here.

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