PepsiCo Posts Strong Q3 Earnings and Revenue, Raises 2023 EPS Outlook

Pepsico Stock

PepsiCo, Inc. (NASDAQ:PEP) has released its third-quarter 2023 financial results, exceeding both revenue and earnings expectations set by the Zacks Consensus Estimate. This marks another successful quarter for the company, showcasing growth in both its top and bottom lines. The robust performance can be attributed to several key factors, including the strength and resilience of its product categories, a diverse product portfolio, streamlined supply chain operations, enhanced digital capabilities, flexible distribution systems, and strong consumer demand trends.

PepsiCo also experienced impressive results in its global beverage and convenience food businesses, which contributed to the positive momentum. As a result of these strong outcomes, the company has revised its core constant-currency earnings per share (EPS) guidance for 2023 upward.

Following the earnings release on October 10, PEP shares surged by 2.1% in the pre-market trading session due to the optimistic third-quarter performance and the improved EPS outlook. It is worth noting that, despite recent challenges, PEP shares have seen a 12.3% decline over the past three months, in contrast to the industry’s 7% decrease.

Here’s a detailed breakdown of the third-quarter results:

Quarterly Highlights

  • PepsiCo’s third-quarter core EPS came in at $2.25, surpassing the Zacks Consensus Estimate of $2.17 and marking a substantial 14.2% increase compared to the previous year. In constant currency, core earnings showed a strong 16% improvement, thanks to robust top-line growth and effective management of inflationary pressures through cost and revenue strategies. The company’s reported EPS of $2.24 represented a 15% year-over-year increase, although adverse currency rates had a 2% impact on EPS for the quarter.
  • Net revenues reached $23,453 million, reflecting a solid 6.7% year-over-year growth, which exceeded the Zacks Consensus Estimate of $23,378 million. The strong revenue performance was primarily attributed to favorable price/mix dynamics in the reported quarter. While unit volume for the convenience food business declined by 1.5% year over year, it remained flat for the beverage business. Foreign currency fluctuations accounted for a 2% impact on revenues.
  • On an organic basis, revenues exhibited an impressive 8.8% year-over-year growth, driven by consistent growth across various product categories and geographic regions. This marked the 10th consecutive quarter of high-single-digit organic revenue growth for PepsiCo. Although the consolidated organic volume experienced a 2.5% decline, effective net pricing increased by 11% in the third quarter, supported by strong realized prices across all segments.

The success across different product categories resulted from accelerated growth in the global beverage and convenience food businesses, reflecting the company’s robust and diversified product portfolio. On a year-over-year basis, organic revenues grew by 8% for the global beverage business and 9% for the convenience food business. Regionally, North American and International businesses reported organic revenue growth of 7% and 12%, respectively.

  • The reported gross profit increased by 9.6% year over year to $12,778 million on a consolidated basis. The core gross profit showed an 8.8% year-over-year increase to $12,766 million. The reported gross margin expanded by 140 basis points (bps), while the core gross margin expanded by 104 bps. This performance exceeded the anticipated core gross margin expansion of 60 bps to 54%.
  • Operating income, on a reported basis, surged by 19.7% year over year to reach $4,015 million. The core operating income experienced a solid 12.1% year-over-year increase, totaling $4,029 million, with the core constant-currency operating income improving by 14%. The reported operating margin expanded by 186 bps compared to the previous year, while the core operating margin expanded by 82 bps. These gains were driven by comprehensive cost-management initiatives designed to enhance supply chain and distribution efficiencies, partly offset by a double-digit increase in advertising and marketing expenses.
  • Segmental Performance: PepsiCo reported revenue growth across all segments, with the exception of AMESA. Organic revenues also saw improvement in all segments.
  • Financial Overview: As of the end of the third quarter of 2023, PepsiCo held cash and cash equivalents worth $10,017 million, long-term debt of $35,837 million, and shareholders’ equity (excluding non-controlling interest) of $18,806 million.
  • Outlook: PepsiCo has raised its core EPS guidance for 2023 and reaffirmed its organic revenue growth prediction of 10% for the year. The company now expects core constant-currency EPS growth to reach 13%, up from the previously stated 12%. It anticipates that currency headwinds will have a 2% negative impact on revenues and core EPS in 2023, based on current exchange rates. PepsiCo also forecasts a core effective tax rate of 20% for the year.

Based on these assumptions, PepsiCo expects core EPS for 2023 to reach $7.54, compared to the previously mentioned $7.47. This represents an 11% increase from the core EPS of $6.79 reported in 2022, as opposed to the earlier expectation of 10% growth.

Furthermore, PepsiCo remains committed to rewarding its shareholders through dividends and share buybacks. In 2023, the company plans to return a total value of $7.7 billion, which includes $6.7 billion in dividends and $1.0 billion in share repurchases.


Looking ahead, PepsiCo has outlined its initial expectations for 2024, aiming to achieve organic revenue and core constant-currency EPS growth at the higher end of its long-term guidance ranges. Previously, the company had projected organic revenue growth of 4-6% and core constant-currency EPS growth in the high-single digits over the long term.

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