PepsiCo stock jumped Thursday after the drinks and snacks maker delivered a better quarter in the three months ended June.
Pepsi (ticker: PEP) reported earnings per share of $1.99 for the June quarter, beating analysts’ expectations of $1.96. Quarterly revenue was $22.3 billion, ahead of the consensus forecast of $21.7 billion.
The prospects were even better. Pepsi raised its guidance for full-year organic sales growth to 10% from 8% in April, with earnings per share growth coming in at 12%, versus a previous guidance of 9%.
Shares of Pepsi rose 1.8% in premarket trading on Thursday.
This is breaking news. Preview Pepsi’s earnings below and check back soon for more analysis.
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Most consumer staples stocks are down this year, but Pepsi is up sharply by comparison. Investors will be excited to see if the drinks and snacks maker can keep up the momentum with its second-quarter results, due before the close on Thursday.
Analysts expect PepsiCo (ticker: PEP) to report earnings per share of $1.96, up from $1.86 per share in the same period last year, and estimates have risen over the past month. Consensus expects revenue to increase to $21.73 billion from $20.23 billion in Q2 2022.
In April, Pepsi delivered a stellar first quarter, giving shares a boost. Pepsi stock is up 1.8% so far this year as of Tuesday, while its peers tracked by the Consumer Staples Select Sector SPDR Fund (XLP) are down 1%. The positive performance gap has actually widened over the trailing 12-month period, as Pepsi is up 8.5% and XLP is up 1.3%.
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Part of what made the stock so successful was evident in the first quarter — namely, the company’s ability to raise prices to meet rising costs without hurting demand. Although inflation is cooling, many households are still struggling to pay for essentials. As a result, Wall Street’s intense focus is on whether packaged food companies can keep prices at levels that keep margins healthy without taking too big a hit on sales.
No doubt investors will want to see that again this quarter. For her part, Goldman Sachs analyst Bonnie Herzog believes Pepsi will be able to deliver. Last week, she reiterated a buy rating on the stock, arguing that the “strong underlying momentum for Pepsi’s businesses” should allow the company to post further sales and earnings growth — and another potential guidance upgrade. She also noted that “despite the challenging macroeconomic environment, consumer elasticities have remained surprisingly resilient.”
In other words, she anticipates that shoppers will continue to pay for Pepsi products even if her budget remains tight.
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Of course, the company isn’t immune to broader factors that have weighed on sales of packaged food and beverages in recent weeks. Some investors remain concerned about an inevitable slowdown in organic growth — at both Pepsi and its peers.
Nonetheless, UBS analyst Jay Sole argues that “the company has demonstrated the ability to deliver outsized organic revenue growth over time and will continue to outperform the broader Staples universe should this general slowdown occur.” He also forecasts Pepsi’s second quarter to surprise on the upside and keeps a Buy rating on the stock.
If Pepsi can make some positive comments about its future organic growth prospects, it could allay some fears about its top line — even if the company doesn’t raise its full-year guidance.
Just under half of the analysts tracked by FactSet are bullish on Pepsi, with an average price target of $200, about 8% higher than the stock’s close on Tuesday.
Write to Teresa Rivas at [email protected]