PepsiCo beat Wall Street's third-quarter earnings and revenue estimates on Thursday, but the company lowered its full-year earnings forecast as its North American business keeps underperforming. International markets, now 41% of net revenue, remain the company's main growth engine.
The company topped analysts' third-quarter estimates on Thursday, yet cut its full-year profit outlook because its home market is recovering more slowly than planned. The beat came from strength overseas, while the United States again dragged on results.
Quarterly results beat expectations
PepsiCo earned $2.34 per share on an adjusted basis, above the $2.29 Wall Street expected, and posted revenue of $25.27 billion against a $24.96 billion estimate. Net income attributable to the company rose to $3.05 billion, or $2.23 per share, from $2.6 billion, or $1.90 per share, a year earlier. Net sales climbed 5.6% to $25.27 billion, while organic revenue increased 3.1%. Shares of Pepsi fell less than 1% in premarket trading.
Full-year guidance comes down
With one quarter left in the year, PepsiCo now expects core earnings per share to grow 2.5% to 3.5%, down from the low end of a prior 5% to 7% range. However, the company raised its net revenue growth outlook to about 6%, the high end of its previous 4% to 6% range. International markets drove that resilience: international business has made up 41% of PepsiCo's net revenue so far this year, with volume growth in nearly every overseas unit except a 1% volume decline in the convenient foods division across Europe, the Middle East and Africa.
North America keeps lagging
At home, PepsiCo's North American beverage volume shrank 2%, while its food division reported flat volume. CEO Ramon Laguarta said the division "performed below our expectations and represents a meaningful opportunity for improvement". CFO Steve Schmitt said in prepared remarks that the domestic turnaround is moving more slowly than expected, and the company's fix so far has centered on product innovation and marketing. Still, Laguarta pointed to some improvement: the North American convenient foods unit, which includes Doritos and Quaker Oats, saw organic revenue improve sequentially, and the beverage unit's organic volume trends picked up on functional hydration and zero-sugar drinks, even as its carbonated soft drink lineup lagged the category. PepsiCo is also planning cost reductions to cut redundancies and discretionary spending, freeing up money for innovation and marketing, Laguarta said.
Source: CNBC
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