PepsiCo (PEP) shares rose almost 2% in pre-market trading after the snack and beverage giant posted better-than-expected second-quarter earnings. The company posted adjusted earnings of $2.12 per share, surpassing the expected $2.03. Meanwhile, revenue also came in ahead of estimates, reaching $22.73 billion compared to the forecasted $22.27 billion.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
PepsiCo Faces Softer Demand
PepsiCo is facing weaker demand for its products. Globally, sales volume dropped 1.5% for its food and stayed flat for its drinks. This measure doesn’t include the effects of price changes or currency shifts.
In North America, the food segment, which includes Frito-Lay and Quaker Foods, saw a 1% drop in volume. The drinks segment in the U.S. did even worse, with a 2% decline in volume.
But It’s Prepared
The decline was largely driven by consumers pulling back due to higher prices and shifting preferences. PepsiCo, like its rival Coca-Cola (KO), is adjusting to changing consumer preferences by offering healthier drinks and snacks. This includes adding options like Poppi, a prebiotic soda brand it recently bought, and launching new flavors of popular snacks like Lay’s and Doritos.
The company is also introducing more budget-friendly products to attract price-sensitive shoppers. This shift comes after several years of price hikes aimed at protecting profit margins.
Looking ahead, PepsiCo reaffirmed its full-year guidance, expecting flat core earnings (at constant currency) and low-single-digit growth in organic revenue. The company’s EPS outlook has improved as the impact of foreign exchange has eased, thanks to a weaker U.S. dollar.
Is PepsiCo a Good Stock to Buy?
Turning to Wall Street, analysts have a Hold consensus rating on PEP stock based on three Buys and 10 Holds assigned in the past three months. At $146.50, the average PEP price target implies an 8.24% upside potential.
