pepsico Quarterly profits and sales announced Thursday beat analysts’ expectations, with international growth offsetting another quarter’s volume decline in North America.
The company’s shares rose more than 2% in morning trading.
Below is a comparison of the company’s fiscal third-quarter report with Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: $2.29 adjusted vs. $2.26 expected Revenue: $23.94 billion vs. $23.83 billion expected
Pepsi’s third-quarter net income was $2.6 billion, or $1.90 per share, down from $2.93 billion, or $2.13 per share, in the same period last year.
Excluding restructuring costs and impairment charges, Pepsi earned $2.29 per share.
Net sales increased 2.6% to $23.94 billion. Excluding acquisitions, divestitures and foreign exchange, Pepsi’s organic revenue increased 1.3% in the quarter.
But the Frito-Lay and Gatorade owner still sees weak demand for its products. Pepsi’s global food and beverage sales volume decreased 1% during the quarter. This metric excludes pricing and currency fluctuations.
CEO Ramon Laguarta said on the company’s conference call that sales volumes were also weak as Pepsi moved to smaller package sizes to appeal to price-conscious consumers. This change reduces sales volume but increases revenue.
Pepsi, in particular, has struggled in the domestic market in recent quarters, leading the company to reinvest in its brands and look for cost-cutting measures.
“We also expect our North American operations to deliver a trend toward increased growth and profitability by aggressively reducing costs, accelerating innovation, and further strengthening our commitment to price-pack architectures,” executives said in prepared remarks.
Pepsi Foods North America, which owns brands such as Doritos, Quaker Oats and Pearl Milling, reported a 4% volume decline in its fiscal third quarter. The company is investing in more “acceptable” snack products, such as Stacy’s pita chips and Quaker rice cakes. More snack options are planned, such as Doritos Protein, aimed at transitioning consumers to protein-rich foods.
Pepsi also announced new packaging for Lay’s potato chips that emphasizes the absence of artificial colors and flavors, and promised to launch NKD versions of Doritos and Cheetos that are free of artificial colors and flavors. Pepsi and other brands are moving to eliminate these ingredients, in part due to pressure from the Trump administration.
Similarly, Pepsi plans to use more olive oil and avocado oil in its snacks. The Make America Healthy Again movement has demonized canola oil and other seed oils despite a lack of scientific evidence.
The company is also trying to attract price-conscious consumers by making multipacks and single-serving snacks cheaper.
Improving the performance of the North American food division is “a top priority for the business,” executives said.
Pepsi’s North American beverage division saw a 3% volume decline, but Laguarta noted “improved momentum” in the business. The company’s eponymous soda saw both volume and revenue growth in the quarter, and executives said year-to-date retail sales of newly acquired Poppi were up more than 50% compared to the same period last year.
In September, Pepsi sold ownership of Rockstar Energy in the United States and Canada to a rival energy drink maker. Celsius. The beverage giant owns 11% of Celsius.
That same month, activist investor Elliott Investment Management announced the acquisition of $4 billion in Pepsi stock. In his presentation and letter to the board, Elliott pushed for a number of changes, including the possibility of refranchising the North American bottling network and reinvesting in the soda brand. In a conference call with the company, Laguarta said Pepsi and Elliott share the belief that the company is undervalued.
“We expect to have discussions in the coming weeks and months,” Laguarta said.
The company also reiterated its full-year outlook. The company still expects core constant-currency earnings per share to be roughly unchanged from last year, with organic revenue expected to grow at a low-single-digit rate.
Pepsi also announced Thursday that Chief Financial Officer Jamie Caulfield is retiring. walmart Steve Schmidt, U.S. Chief Financial Officer, will succeed him on November 10.
