Economic Update – Follow-Up
PepsiCo reported varied quarterly results on Tuesday, revealing a fifth consecutive quarter of declining demand for its snacks and beverages in North America. This trend contributed to a drop of over 2% in the company’s stock during pre-market trading.
Performance Overview:
- Earnings Per Share: $1.96, adjusted compared to the expected $1.94.
- Revenue: $27.78 billion, falling short of the anticipated $27.89 billion.
PepsiCo reported a net income of $1.52 billion (or $1.11 per share) for the fourth quarter, an increase from $1.3 billion (or 94 cents per share) in the same period last year. When accounting for restructuring costs, impaired asset losses, and other factors, the adjusted earnings per share stood at $1.96.
Net sales experienced a slight decline to $27.78 billion, while organic revenues—which exclude the impact of acquisitions, divestitures, and currency fluctuations—rose by 2.1% during the fourth quarter.
Challenges in North American Demand:
Despite a global sales increase of 1% for snacks and drinks, demand in North America has softened as consumers exercise greater caution in their spending habits, directly affecting snack purchases and retail sales.
Sales from the North American Frito-Lay unit declined by 3% during the quarter, reflecting consumer efforts to manage their food budgets against a backdrop of rising prices and interest rates.
The company observed that the salty snack segment has performed weaker relative to other packaged food categories in 2024, reversing a trend of previous years where this sector excelled.
In the beverage segment, North American sales volumes also dipped by 3%. However, some brands, such as Gatorade, demonstrated a positive performance, with Mountain Dew achieving annual sales exceeding $1 billion.
Meanwhile, the North American Quaker Foods unit reported a 6% decrease in sales volume, impacted by product recalls in December. PepsiCo anticipates improvements in this sector in 2025 once the effects of the recalls have dissipated.
2025 Growth Projections:
PepsiCo forecasts modest growth for its organic revenues in 2025 and an expected increase in adjusted earnings per share on a constant currency basis.
“As we look towards 2025, we will continue our focus on expanding our international operations while implementing strategies aimed at enhancing our performance in North America,” stated CEO Ramon Laguarta.
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