PepsiCo bumps up full-year forecast on consumer resilience
Fizzy drinks and snack giant sees steady demand even as average prices jump 16% in first quarter
PepsiCo raised its annual forecasts on Tuesday after price hikes undertaken to offset higher costs and steady demand helped the cool drink and snack giant beat first-quarter results.
The results point to resilient consumers and follow similar quarterly performances by rival Coca-Cola and Nestlé. PepsiCo’s shares rose 2% in early trading on Tuesday.
Average prices jumped 16% in the first quarter, PepsiCo said, while organic volume slipped 2%.
Global consumer goods companies have raised prices since the pandemic to battle a jump in costs of raw materials, labour and shipping.
“We do not expect commodity prices to decrease for us, only the rate of inflation will get a little bit lighter during the course of the year,” CFO Hugh Johnston said.
Meanwhile, the Frito-Lay maker also plans to raise prices in some regions, in contrast to its decision earlier this year to hit a pause.
Most of the pricing is in place, but “there are some markets, highly inflationary markets around the world, where we might have to take additional pricing”, CEO Ramon Laguarta said in an earnings call.
PepsiCo expects 2023 organic revenue to rise 8%, compared with its prior forecast of a 6% increase. Annual core earnings per share was revised to $7.27, compared with $7.20 earlier.
The raised forecast at this stage in the year suggests “very deep confidence in what is going on in the snacking business and also the improvements on the beverage side”, said Markus Hansen, a portfolio manager at Vontobel Quality Growth, adding the company is conservative.
Sales in the North America beverage unit, PepsiCo’s largest business and which houses 7UP and Gatorade, rose 8% in the quarter.
Net revenue rose 10% to $17.85bn, topping estimates of $17.22bn. Adjusted profit of $1.50 per share also beat estimates of $1.39.
Reuters