On Thursday, July 11th, PepsiCo Inc. (PEP) released its second-quarter earnings report for the period ending June 15th, presenting a mixed financial picture influenced significantly by trends in its key markets.
The beverage and snack giant reported revenue increased by nearly 1% year-over-year to $22.5 billion. This figure, while showing modest growth primarily driven by the company’s PepsiCo International operations, slightly missed the average analyst forecast of $22.57 billion compiled by LSEG. However, the company exceeded market expectations on profitability, reporting net income of $3.08 billion, or $2.23 per share, up from $2.75 billion, or $1.99 per share, in the same period last year. Excluding certain items, adjusted earnings per share reached $2.28, beating the analyst consensus of $2.16.
Despite the earnings beat, executives expressed a more conservative outlook for the remainder of the fiscal year. They narrowed their projection for full-year organic revenue growth from the previous quarter’s forecast of “at least 4%” to now anticipating growth of “around 4%”. CEO Ramon Laguarta stated during a call with analysts, “When we predicted at least 4%, we thought we could probably aim for around 5%. But now we feel the growth rate is around 4%. This change is mainly related to US consumers.”
This shift in guidance reflects noticeable weakness in the North American market. Executives highlighted that consumers have become more value-conscious following several years of price increases. Shoppers are reportedly cutting back on purchases of higher-priced snacks like chips or switching to more affordable private-label alternatives. This change in purchasing behavior is now being observed across various income levels, a shift from previous quarters where it was more concentrated among lower-income consumers.
The impact of this demand softening was evident in volume figures for PepsiCo’s largest North American divisions. Frito-Lay North America saw its volume decline by 4% year-over-year, while PepsiCo Beverages North America experienced a 3% volume drop. The Quaker Foods unit in North America faced a sharper 17% volume decrease this quarter, a decline attributed to the lingering effects and related matters stemming from the Salmonella contamination recall incidents in December and January. Company executives anticipate volume in the Quaker Foods division will show improvement in the second half of the year as the impact of the recall subsides.
Following the release of the mixed results – a profit beat overshadowed by a revenue miss and cautious revenue guidance – PepsiCo’s stock initially slipped more than 1% in early trading on Thursday. However, the share price gradually recovered throughout the day, managing to close with a modest gain of 0.22%, suggesting that the strong profitability and reaffirmed core earnings guidance helped reassure investors despite the top-line and volume challenges in North America. The stock’s trading range over the past year highlights its volatility, with a 52-week high of $192.38 and a 52-week low of $155.83. The last closing price was $166.38.
Overall, the Q2 report indicates that while PepsiCo’s international business remains a source of solid growth and the company effectively manages profitability, navigating shifting consumer spending habits and volume declines in its crucial North American market presents a key challenge for the remainder of the fiscal year.
Riley Evans 
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