PepsiCo trades lower after warning on subdued growth, geopolitical tension

PepsiCo (NASDAQ:PEP) traded lower in early action on Tuesday after missing estimates with its Q3 earnings report and guiding for a low-single-digit increase in organic revenue. Organic revenue was up 1.3% for the quarter that ended on September 7 to fall short of the consensus expectation of +3% and last year’s mark of +8.8%. Organic revenue was down 1% for the Frito-Lay North America business. The company reported that volume for both its food and beverage divisions was down 2% during the quarter. Looking ahead, PepsiCo (PEP) continues to expect to deliver at least 8% core constant currency EPS growth as it plans to focus on tightly managing costs to better align with the subdued growth environment that it said it is currently operating in.

Seeking Alpha analyst Vinay Utham said that despite the marginal EPS beat, PepsiCo’s (PEP) Q3 earnings report was largely disappointing. “While the continued declines seen in both the revenues (down 13% y/y) and operating profit (28% y/y) of Quaker Foods North America was not surprising, the slowing growth in operating profit (7% y/y in Q3 vs 17% y/y in Q2) as well as meager revenue growth for the second straight quarter of the Beverages business is concerning,” he highlighted. Utham said that in addition to the Quaker Foods product recall, PEP management has added geopolitical tensions as an additional risk factor, which explains the lowering of the revenue guidance for the second straight quarter.

Shares of PepsiCo (PEP) were down 1.15% in premarket trading. Coca-Cola (KO) dipped 0.30% and Keurig Dr Pepper (KDP) was down 0.17%. Celsius Holdings (CELH) showed a gain of 0.59%, with PepsiCo’s (PEP) earnings call upcoming.