PepsiCo (PEP) showed improved results with its beverages segment in the fourth quarter after pledging in December to lower some prices.
Revenue was up 5.6% year-over-year to $29.3 billion. Organic sales rose 2.1% during the quarter to edge past the consensus expectation for a rise of 2.0%. Organic sales growth was led by a 5% increase for the Europe, Middle East, and Africa segment, while the PepsiCo Foods North America segment lagged with a 1% decline.
Total volume for food fell 2% during the quarter, while beverage volume was up 1%.
Operating profit was up 13% during the quarter on a constant currency basis, driven higher by double-digit increases in the PepsiCo Beverages North America and EMEA segments. Non-GAAP EPS of $2.26 topped the consensus estimate by $0.02.
Looking ahead, PepsiCo (PEP) expects organic revenue to be up 2% to 4% for the full year and core constant currency EPS to be up between 4% and 6%. Total cash returns to shareholders are expected to be approximately $8.9 billion, comprised of dividends of $7.9 billion and share repurchases of $1.0 billion.
“For fiscal 2026, we aim to accelerate growth by restaging large, global brands, introducing an expansive set of product innovations in emerging and functional spaces, and offering sharper value to address consumer affordability dynamics. We also aim to deliver arecord year of productivity savings, which will help fund investments to accelerate growth,” stated CEO Ramon Laguarta. “As a result, we expect North America’s business performance to improve and the international business to remain resilient this year,” he added.
Shares of PepsiCo (PEP) were down 1.1% in premarket trading. Coca-Cola (KO) edged 0.6% lower, and Keurig Dr Pepper (KDP) dipped 0.4%.
Weighing in on the report, Seeking Alpha analyst Agara Capital noted the fact that PepsiCo (PEP) exceeded overall sales projections does not mean all is well because much of the strength came from the international segment. “The important data point, however, remains that food sales declined 1% in North America. This supports my belief that the company has little, if any, pricing power left and can only overcome this through aggressive investments to restore volume,” added Agar Capital. The $10 billion buyback and dividend are expected to provide some comfort to shareholders who were concerned about the company over the last few months. However, it was also seen as an admission that the company will need to utilize financial engineering to continue to support the stock. Agar Capital said the narrative changes from “bearish” to “I want to see.”