Pepsi stock (NASDAQ:PEP) rose on Wednesday after the food and beverage giant reported better-than-expected profits for the third quarter and improved its projection for the upcoming fiscal year 2022.
PepsiCo (NASDAQ:PEP) announced adjusted earnings of $1.97 per share for the third quarter, above the consensus forecast of $1.84 per share among market analysts. The revenue came in at $21.9 billion, much more than the projections of $20.8 billion. During the same period last year, the company’s profits per share came in at $1.79, while the company’s revenue was $20.2 billion.
Pepsi Stock Growth
Pepsi’s organic sales growth for the quarter was 16%, an important indicator for consumer staples like Pepsi.
The business stated that it anticipated organic sales in the fiscal year to climb by 12%, which was higher than its previous estimate of approximately 10% and more than the projections made by Wall Street. According to management, core constant-currency profits per share will climb by 10%. This is an improvement over prior predictions, which called for growth of 8%. Earnings per share are projected to increase by approximately 7.5% to $6.73 for the fiscal year 2022, when measured in terms other than constant currency.
During the most recent trading session, shares of Pepsi increased by 3.6% to $168.44, while the S&P 500 index rose by 0.3%. The stock has performed better than the S&P, which has lost 25% of its value this year, falling only 3%.
Pepsi might stand out as an outlier during an earnings season that is anticipated to be a negative one. During the epidemic, consumers devoured more snacks than usual, which led to considerable growth for the firm. This pattern has continued into the reopening period. However, many customers have been forced to reduce their expenditure due to rising prices.
Food appeared to be Pepsi’s most successful category throughout this quarter. The Frito-Lay business segment of Pepsi achieved an organic revenue increase of 20% in North America and a growth of 22% in Latin America.
Andrea Teixeira, an analyst at J.P. Morgan, stated in a research note released prior to the results announcement that “all indicators are that momentum continues in consumables as consumers reallocate spending from durables/discretionary.”
PepsiCo has long been seen as one of the most reliable performers on Wall Street. According to what CFRA analyst Garrett Nelson noted, the business has failed to meet the consensus estimate once in the last ten years. Pepsi’s continuing pricing power, which he stated demonstrates the brand’s resilience in an inflationary climate, was a major contributor to the company’s impressive success this quarter. After reviewing Pepsi’s performance, Nelson upgraded his recommendation to Strong Buy from Buy.
“The investment we’ve made in the brands in the last few years are paying off in the sense that our brands are being stretched to higher price points and consumers are following it,” said PepsiCo CEO Ramon Laguarta in a call with investors. “The investment we’ve made in the brands in the last few years has paid off because our brands are being stretched to higher price points and consumers are following it.”
Like the rest of the economy, Pepsi (NASDAQ:PEP) is not immune to the macroeconomic issues that are now being faced. According to management, gross margins decreased by around 20 basis points, equivalent to 0.2 percentage points.
In addition, the company is modeling for the possibility that foreign-exchange headwinds will negatively impact net revenue and core earnings-per-share performance by approximately 2.5 percentage points. This increase from previous projections, which called for a negative impact of only two percentage points.
Featured Image- Unsplash @ NIKHIL
Author Valerie Remorosa 
