Beverage giant PepsiCo, Inc. (NASDAQ: PEP) reported better-than-expected second-quarter results for the period ending June 11, 2022. The solid results were on the back of both revenue and earnings surpassing estimates.
Further, the company raised its revenue outlook for the year too, resulting in the stock appreciating by almost 1% to $171.50 in the pre-market hours.
Revenues & Earnings Soar
Pepsi reported quarterly net revenues of $20.23 billion, a growth of 5.2% from the previous year. Further, the figure topped the consensus estimate of $19.51 billion. The company’s strong revenue growth can be attributed to the 22.8% and 13.8% year-over-year growth witnessed in Frito-Lay’s North American and Latin American net revenues, respectively.
Meanwhile, the company’s core earnings per share (EPS) for the quarter came in at $1.86, up 8.1% from the previous year. Moreover, the figure surpassed the consensus estimate of $1.74.
What are Other Key Operating Metrics Saying?
The company’s operating profit from the quarter declined by 33.6% from the previous year to $3.1 billion.
Pepsi attributed the hit to the company’s operating profit primarily to the non-cash impairment charges of $1.4 billion related to the Russia-Ukraine conflict, the selling or non-continuance of certain non-strategic brands in Latin America, and the company’s decision to terminate its agreement with Vital Pharmaceuticals to distribute Bang Energy drinks.
The company’s liquidity position at the end of the quarter remained almost unchanged at $5.5 billion.
Raised Guidance
In an improvement from its previous guidance, Pepsi now expects organic revenue growth of 10% for the Fiscal Year 2022, compared to 8% earlier.
Management’s Commentary
CEO of Pepsi, Ramon Laguarta said, “We are pleased with our results for the second quarter as our business momentum continued despite ongoing macroeconomic and geopolitical volatility and higher levels of inflation across our markets. Our results are indicative of our highly dedicated employees, the strength and resilience of our categories, agile supply chain and go-to-market systems and strong marketplace execution.”
Wall Street’s Take
The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on seven Buys, six Holds, and one Sell. The PEP average price target of $180 implies the stock has upside potential of 5.6% from current levels.
Investors are Positive About Pepsi Stock
The TipRanks’ Stock Investors tool shows that top investors currently have a Very Positive stance on PEP. Further, 17.5% of the top portfolios tracked by TipRanks, increased their exposure to PEP stock over the past 30 days.
Key Takeaways
Pepsi’s results for the second quarter have been impressive amid record-high inflation levels and an impending recession. Also, investors have been attracted to this safe-haven stock amid widespread economic uncertainties. However, rising costs have narrowed the company’s margins, which could be a cause of concern for the company in the near term.
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