Investing 13-10-2022 09:11 20 Views

PepsiCo Q3 results suggest consumer is keeping strong in all geographies

PepsiCo Inc (NASDAQ: PEP) is up 4.0% on Wednesday after the beverage company reported market-beating results for its fiscal third quarter and raised its guidance for the future.

PepsiCo Q3 financial highlights

Net income printed at $2.70 billion versus the year-ag $2.22 billion Per-share earnings climbed significantly from $1.60 to $1.95 Adjusted EPS was $1.97 as per the earnings press release Revenue jumped 8.8% on a year-over-year basis to $21.97 billion Consensus was $1.84 of adjusted EPS on $20.84 billion in revenue Revenue from Europe and Latin America was up 0.9% and 19.9%

Currency headwinds, the multinational said, resulted in a 3.0% hit to revenue. Volume was down 1.0% this quarter but it was more than offset by a 17% increase in pricing. On CNBC’s “Squawk Box”, CFO Hugh Johnston said:

We passed along a bit of inflation and saw good consumer response despite increased prices. So, operating margins were actually up about 30 basis points and we’ve got our cost structure under control.

What else was noteworthy?

Other notable figures in the earnings report include a 9.7% increase in cost of sales that resulted in a 240-basis points contraction in gross margin.

Inventories were up 15.5% in Q3 and organic revenue grew 16%. The Finance Chief added:

Frito had a remarkable quarter – one of the best I can remember in a long time. Its revenue grew 20% in North America. But then Quaker grew 16% and beverages 13%. So, it’s pretty broad-based. They’re all capable of growing at accelerated rates.

Wall Street continues to recommend buying PepsiCo stock that’s now trading near the price at which it started the year.

PepsiCo stock up on raised guidance

For the full financial year, PepsiCo now forecasts $6.73 of core per-share earnings versus analysts at $6.69. It expects a 12% annualised growth in fiscal 2022.

The Nasdaq-listed firm is committed to returning $7.70 billion to its shareholders this year. According to CFO Johnson, consumer is keeping strong in pretty much all geographies at least so far.

We’ve gotten pretty good at cost control while growing the top line. We’re trying to prepare for what could be a tougher future from a consumer perspective. If it is, we’ll be ready for it. If it’s not, you’ll see quarters like the one we just posted.

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