PepsiCo gains after strong international results; Coca-Cola and beverage peers also gain

PepsiCo (NASDAQ:PEP) traded higher in early action on Thursday after posting a better-than-anticipated Q2 earnings report. Organic revenue was up 2.1% for the quarter that ended on June 14 to top the consensus expectation of +1.2%. Organic revenue was up 7% for the EMEA segment and rose 7% for the Latin America Foods segment to offset a 2% decline in the PepsiCo Foods North America segment.

Volume was down 1.5% during the quarter for the convenience food business and flat for beverages, while foreign exchange translation had a positive 1.5 percentage point impact on results.

Operating profit fell 5% in Q1 on a constant curreny basis, led by double-digit declines for the Asia Pacific Foods and PepsiCo Foods North America businesses. Core operating profit was $3.91 billion vs. the consensus estimate of $3.88 billion. Non-GAAP EPS was reported at $2.12 vs. $2.03 consensus and $2.28 a year ago.

“We’re encouraged by the acceleration in our net revenue growth versus the previous quarter with our businesses effectively navigating through a challenging environment. Our international business momentum continued, while our North America businesses improved their execution and competitiveness in key subcategories and channels,” highlighted CEO Ramon Laguarta.

Looking ahead, PepsiCo (NASDAQ:PEP) said it remains confident in its ability to deliver low-single-digit organic revenue growth with core constant currency EPS to be approximately even with the prior year. The core USD EPS outlook has improved versus previous expectations as foreign exchange headwinds have moderated due to the weakening of the U.S. dollar.

On Seeking Alpha, analyst Julia Ostian said it looks like PepsiCo (PEP) is almost back to net income levels of 2024, beating on both revenue and earnings.

“The issues we’ve seen in the past, like weak demand for beverages in North America, are becoming more and more apparent, which should worry long-term investors. The snacks segment held up, but the full-year outlook was reaffirmed rather than raised. After this year’s slip, it was a solid quarter for PepsiCo, but it doesn’t change the core concerns around growth sustainability and payout quality,” highlighted Ostian.

Shares of PepsiCo (PEP) were up 1.7% in premarket trading. Coca-Cola (KO) edged 0.4% higher and Keurig Dr Pepper (KDP) was up 0.6%. Celsius Holdings (CELH) was down 0.1%, with PepsiCo’s (PEP) earnings call upcoming.