PepsiCo sees stronger results globally than in North America

PepsiCo (PEP) traded slightly higher in early investor reaction to the company's fiscal third-quarter earnings report.

Revenue was up 5.6% year-over-year to $25.3B. Organic sales rose 3.1% during the quarter to beat the consensus expectation for a rise of 2.9%. Organic sales growth was led by a 9% increase for the Europe, Middle East, and Africa segment, while the PepsiCo Foods North America segment saw flat sales as the turnaround in the company's home region faltered.

Total volume for food rose 1% during the quarter, while beverage volume was up 3%.

Core operating profit increased 3%, with core operating margin contracting 35 basis points. The core operating profit performance reflects productivity savings, effective net pricing, and a 4-percentage-point favorable impact of tariff refunds. Those impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses. Core EPS increased 2% to $2.34 to top the consensus estimate by $0.04. The EPS improvement was primarily driven by operating profit growth.

Looking ahead, PepsiCo (PEP) expects organic revenue to be up 3% for the full year and core constant currency EPS to be up between 2.5% and 3.5%. Total cash returns to shareholders are expected to be approximately $8.9B, comprised of dividends of $7.9B and share repurchases of $1.0B. "We remain focused on building upon the strength of the international business while acting with urgency to sustainably improve our performance in North America through more investments in innovation, effective brand building, and sharper marketplace execution by channel," highlighted CEO Ramon Laguarta. "Additional structural cost reduction actions are being identified and will be implemented in the coming months to help fund investments that aim to accelerate organic revenue growth and mitigate the impacts of rising input cost inflation," he added.

Shares of PepsiCo (PEP) were up 1.1% in premarket trading on Thursday to $125.02 vs. the 52-week range of $123.47 to $171.48. Coca-Cola (KO) and Keurig Dr Pepper (KDP) were both slightly higher in the early session as well.

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