PepsiCo (PEP) -) shares moved higher Tuesday after it posted stronger-than-expected third-quarter earnings, while boosting its full-year profit forecast, as it continues to pass on price increases in its snacks and drinks businesses.
For the three months ended in September, earnings came in at $2.25 a share, up 14% from the year-earlier period and ahead of the Wall Street consensus of $2.15 a share. Group revenue was narrowly ahead of forecast at $23.45 billion and up 6.7% from the year earlier.
Organic-sales growth, which separates out currency-market impacts as well as mergers and acquisitions and is a key figure for earnings potential, rose 8.8% from a year earlier. The company posted the rise even as case volumes were flat and snack volumes were down around 1.5%.
PepsiCo was able to execute price increases of around 11% over the third quarter. That was down from 15% over the three months ended in June but still solid enough to improve the group's profit outlook for a third straight quarter.
Looking into the 2023 financial year, PepsiCo said sees organic-revenue growth of around 10% with core earnings for the year rising to $7.54 per share, a 6-cent increase from its prior estimate.
Pepsi sees '24 core profit at upper end of target
"We are pleased with our performance as our businesses and associates displayed tremendous agility and resilience across geographies and categories in an evolving and dynamic environment," said CEO Ramon Laguarta.
“We believe that our businesses can continue to perform well in the coming years with category growth normalizing, as we have made numerous investments in our brands, manufacturing capacity, go-to-market systems, supply chain, technology, and people, to execute against our strategic framework and modernize our company.
"We expect our full-year 2024 organic revenue and core constant currency EPS growth to be towards the upper end of our long-term targets.”
PepsiCo shares were marked 1.95% higher in early afternoon trading Tuesday to change hands at $164.50, trimming the stock's six-month decline to around 10.8%
Earlier this summer, PepsiCo's smaller rival, Coca-Cola (KO) -), also pegged full-year revenue higher, with expected gains of between 8% and 9%. The estimate followed a stronger-than-expected Q2 earnings report that included price hikes of around 10% across the board. The pricing offset flat overall case volumes.
Regarding Coke, CFRA analyst Garrett Nelson said that "[aggressive] price increases are beginning to hurt volumes and we think recent softness in Pepsi and Consumer Staples names more broadly makes for a particularly compelling entry point."
The analyst reiterated a strong buy "on this S&P dividend aristocrat." Coke is one of a few dozen S&P 500 stocks so-named because they've raised their dividends for 25 consecutive years.
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