PepsiCo reported quarterly earnings and revenue that surpassed analysts' expectations, driven by improved organic sales across its operations. Despite this performance, the company's shares experienced a decline of over 1% in premarket trading following the announcement.
Fourth-Quarter Financial Performance
PepsiCo's fourth-quarter results included:
- Adjusted Earnings Per Share: $2.26 (vs. $2.24 expected)
- Revenue: $29.34 billion (vs. $28.97 billion expected)
Net income attributable to the company for the fourth quarter was $2.54 billion, or $1.85 per share. This marks a significant increase from $1.52 billion, or $1.11 per share, in the prior year. Excluding specific charges, earnings reached $2.26 per share.
Net sales rose 5.6% to $29.34 billion, with organic revenue increasing 2.1% in the quarter.
Demand and Pricing Strategy
Demand for PepsiCo's snacks has been slow, a trend attributed to consumers reacting to higher prices. To address this, PepsiCo plans to reduce prices on products from its North American food division. This strategy aims to enhance competitiveness and increase purchase frequency, with the company stating that productivity savings would mitigate the impact of these lower prices.
CEO Ramon Laguarta noted a sequential acceleration in reported and organic revenue growth, with improvements in both North America and International businesses. However, he highlighted that the company is observing volume declines, particularly within its North American divisions. This metric isolates demand by excluding pricing and foreign exchange fluctuations.
Volume Trends and Regional Performance
Globally, food volume decreased by 2% in the quarter, while global drink volume saw a 1% increase. North America remained a weaker point for the company, though it is showing signs of improvement. Inflation-impacted consumers have been purchasing fewer PepsiCo snacks and drinks.
- PepsiCo Foods North America (including brands like Quaker Oats and Cheetos): Volume fell 1%.
- PepsiCo Beverages North America (including Gatorade, Starry, and Poppi): Volume declined 4%, despite a 2% rise in organic sales.
Strategic Outlook and Investor Agreement
PepsiCo reiterated its 2026 outlook, projecting organic revenue growth of 2% to 4%. Additionally, the company expects core constant currency earnings per share to increase by 4% to 6%.
In December, PepsiCo reached an agreement with activist investor Elliott Investment Management. This strategic plan involves reducing PepsiCo's U.S. product lineup by 20%, cutting costs across its food and beverage operations, and lowering snack prices.
The company anticipates an improvement in its North American business and continued resilience in its international divisions as these strategies are implemented.