PepsiCo shares drop despite strong second-quarter sales
What's happening: Shares of PepsiCo dropped on Thursday after the company disclosed its second-quarter results.
What happened: Despite reporting robust sales, the snack and beverage giant fell short of earnings expectations, impacting share prices. PepsiCo's growth was largely driven by international markets, while U.S. volumes remained static, putting pressure on the stock.
How were the results: Based in Purchase, New York, the company saw single-digit sales growth during the second quarter.
Net revenues increased by 6.4% year-over-year to $24.18 billion, exceeding the consensus estimate of $23.96 billion. However, core earnings rose only 4% to $2.20 per share, falling just short of Wall Street's expectation of $2.21 per share.
PepsiCo Stock Overview
PEP stock began trading at $138.70 on Thursday. PepsiCo has a market capitalization of $189.31 billion, a price-to-earnings ratio of 18.18, a price/earnings-to-growth ratio of 3.04, and a beta of 0.35. The company's 50-day moving average price is $140.26, while the 200-day moving average is $150.67. Its current ratio stands at 0.93, with a quick ratio of 0.74 and a debt-to-equity ratio of 1.91. Over the past year, PepsiCo's stock has ranged from a low of $133.73 to a high of $171.48.
In its latest quarterly earnings report released on Thursday, July 9th, PepsiCo (NASDAQ:PEP) announced earnings of $2.20 per share, slightly surpassing the consensus estimate of $2.19 by $0.01. Revenue for the quarter reached $24.18 billion, exceeding analysts' expectations of $23.95 billion. The company achieved a return on equity of 54.63% and a net profit margin of 10.78%. Compared to the previous year, quarterly revenue rose by 6.4% when it had reported earnings of $0.92 per share during the same period. For fiscal year 2026, PepsiCo has projected earnings per share between 8.550 and 8.710. Analysts on the sell-side anticipate that the company will report earnings of 8.57 per share for the current fiscal year.
PepsiCo shares
Why it matters: Like many packaged food companies, PepsiCo has been affected by reduced consumer spending. They're attempting to boost sales by lowering prices and investing in healthier product options. In North America, they cut prices on Lay’s and Doritos by as much as 15%, aiming to attract consumers opting for more economical choices amidst inflation worries.
Additionally, food and beverage firms have had to deal with increased packaging and logistics costs due to rising fuel prices influenced by the US-Iran conflict.
In specifics, revenues for PepsiCo Foods North America dipped by 2%, while the Beverages North America segment grew by 7%. Internationally, organic revenues jumped 7% during the quarter, marking at least mid-single-digit growth for the 21st consecutive quarter.
Globally, organic volumes for convenient foods rose 3% and 2% for beverages. Operating profits surged 125% to $4.02 billion, with operating margins expanding by 875 basis points to 16.6%.
PepsiCo upheld its fiscal 2026 sales and adjusted earnings guidance at $97.68-$99.56 billion and $8.55-$8.71 per share, respectively. Management also cautioned about the potential for higher commodity costs in the latter half of the year.
PepsiCo shares decline
How shares responded: Following the release of these results, PepsiCo's shares fell by 3.3%, closing at $137.86 on Thursday. Despite this decline, the stock has risen approximately 3% over the past year.
What to watch: Investors will focus on upcoming product releases and any further price reduction announcements. Market observers will also monitor consumer trends and inflation data closely.