PepsiCo, the multinational food and beverage company, has surpassed earnings expectations for the first quarter of 2024. Despite a recall of some Quaker Foods cereal and bars that affected volume, PepsiCo reported strong international sales growth, leading to higher revenue and earnings per share than anticipated.
In terms of earnings per share, PepsiCo reported $1.61 adjusted, exceeding the expected $1.52. Additionally, revenue reached $18.25 billion compared to the estimated $18.07 billion. The company’s net income attributable to the company also rose to $2.04 billion, or $1.48 per share, from $1.93 billion, or $1.40 per share, in the previous year.
The volume of PepsiCo’s products, however, continues to face challenges due to higher prices. Both the food and beverage segments experienced a decline in volume, with the food division seeing a 0.5% decrease and the beverage segment reporting flat volume. This decline in volume can be attributed to the increased prices of Gatorade, Fritos, and other products in PepsiCo’s portfolio.
The recall of Quaker Foods cereals and bars further impacted PepsiCo’s volume problem. The company issued a recall for potential salmonella contamination in December, which was later expanded in January. As a result, the North American Quaker Food division saw its volume plummet by 22% in the first quarter. The recall also had a negative impact on PepsiCo’s organic volume by approximately 1%.
Despite these challenges in North America, PepsiCo experienced stronger demand internationally. In the Asia Pacific, Australia, New Zealand, and China region, snacks reported a 12% volume growth. Europe, which has also faced higher grocery prices, saw a 7% increase in beverage volume and a 2% rise in snack volume.
Looking ahead, PepsiCo reaffirmed its outlook for 2024. The company expects organic revenue to increase by at least 4% and core constant currency earnings per share to climb by at least 8%. PepsiCo executives acknowledged the anticipation of a normalization and moderation in category growth rates in the coming years. They also emphasized the importance of consumers remaining mindful of their budgets and making informed purchasing decisions.
Despite the recall and volume challenges in the domestic market, PepsiCo’s strong international sales growth has allowed the company to surpass earnings expectations. As the company continues to navigate market dynamics and consumer preferences, it remains focused on delivering consistent growth and value to its shareholders.
