PepsiCo – guidance raised

PepsiCo – guidance raised

Pepsi has reported organic revenue growth of 13% to $19.2bn, with underlying operating profit up 22% to $3.2bn. This reflects strong performances from all divisions apart from Quaker Foods North America, and there was particularly strong growth in PepsiCo Beverages North America.  

Management has increased guidance. They now expect full year organic revenue growth of 6%, compared to mid-single-digits, and an 11% increase in underlying earnings per share, compared to high single digits.  The group still plans to return roughly $5.9bn to shareholders, through dividend payments of $5.8bn and share repurchases of $106m, which are already completed.

The shares rose 1.7% in pre-market trading.

William Ryder, Equity Analyst at Hargreaves Lansdown commented:

“Pepsi’s had enough fizz in the second quarter to raise guidance for the full year. The confidence reflects normalising sales trends in many markets, although that’s not necessarily a positive trend for all parts of the business.

Quaker Foods North America did a roaring trade early on in the pandemic as people spent more time at home and health was at the forefront of everyone’s mind, but this demand appears to be going flat. The big losers were oatmeal, pancake syrup and mix, and ready-to-eat cereal, perhaps reflecting more commuters getting breakfast on-the-go once more instead of eating at home. On the other hand, Cheetos macaroni and cheese got a special mention after being introduced last year, so some consumers still want to indulge in old favourites even if the branding is new.

Overall, Pepsi is looking like it’s still offering some refreshing recovery signs. However, the next couple of quarters could still see some surprises bubbling up as sales trends adapt to normal life again.”