Key Points
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Pepsi edged past expectations in its second-quarter earnings report.
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The company is still struggling with headwinds in the domestic market.
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After a recent sell-off, Pepsi’s dividend looks attractive.
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Shares of PepsiCo (NASDAQ: PEP) were climbing today after the packaged food and beverage giant surprised the market with its second-quarter earnings report, beating analyst expectations. While growth was still modest, it did show the company making an improvement from the first quarter.
As of 12:12 p.m. ET, the stock was up 6.8% on the news.
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PepsiCo gets back to growth
PepsiCo stock was struggling coming into the report, so any sign that the business is moving in the right direction was enough to give the stock a boost.
Revenue in the quarter rose 1%, though organic revenue, which factors out the impact of divestitures, acquisitions, and currency exchange, was up 2.1%. Revenue came in at $22.7 billion, which was ahead of estimates at $22.3 billion.
Costs rose faster than revenue as gross profit in the period was down, and core constant-currency earnings per share fell 5% to $2.12, which topped the consensus at $2.03.
International markets remained strong, with organic revenue up 5% or more in three of its four international segments. Pepsi Foods North America, which is primarily made up of Frito-Lay, remained a weak spot with organic revenue down 2%, a sign that consumers may be cutting back or trading, as consumer sentiment has been weak.
CEO Ramon Laguarta said, “We’re encouraged by the acceleration in our net revenue growth versus the previous quarter, with our businesses effectively navigating through a challenging environment.”
What’s next for PepsiCo?
For 2025, PepsiCo expects a low-single-digit increase in organic revenue, and core constant-currency EPS flat.
In the context of the company’s broader challenges, that seemed to be enough to please investors. After the recent sell-off, its dividend looks attractive at a yield of 4.3%.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
