PepsiCo shares PEP rose more than 1% on Thursday after the company reported quarterly revenue and earnings above Wall Street expectations, although the beverage and snacks giant lowered its full-year core profit forecast.
Revenue for the quarter rose 5.6% to $25.27 billion, beating analysts’ estimate of $24.96 billion, according to LSEG data.
Core earnings per share came in at $2.34, above the $2.29 expected.
The stronger quarterly results were overshadowed by a weaker outlook.
PepsiCo now expects fiscal 2026 core earnings per share, adjusted for currency fluctuations, to increase 1% to 2%, compared with its previous forecast for growth of 4% to 6%.
The company maintained a more optimistic view on revenue, expecting annual organic revenue to rise about 3%, compared with its previous forecast of 2% to 4%.
North America remains a key challenge
PepsiCo said its efforts to restore growth and profitability in North America are taking longer than expected, prompting the company to pursue additional structural cost reductions.
“In North America, we remain committed to improving growth and core operating margin. However, it is taking more time than we planned,” said PepsiCo CFO Steve Schmitt in prepared remarks.
“Looking ahead, 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,” said CEO Ramon Laguarta in a statement.
“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 said.
The company’s North American food business saw volumes remain flat in the third quarter ended September 5, while beverage volumes fell 2% from a year earlier.
PepsiCo had already cut prices by as much as 15% on products including Lay’s and Doritos in February as it attempted to address affordability concerns.
Last month, it said it would raise prices on some US products to offset rising costs and improve profitability.
Activist pressure weighs on PepsiCo
The weakness has also kept pressure on PepsiCo to revive its soda business, improve its share price and consider changes to its portfolio following activist investor Elliott Investment Management’s disclosure of a roughly $4 billion stake last year.
After discussions with Elliott, PepsiCo said in December it would review its North American supply chain and pursue aggressive cost-cutting measures.
The stock has fallen 13% this year and 20% over the past six months.
Shares closed at $123.73 on Wednesday.
JPMorgan downgraded PepsiCo to Neutral from Overweight last month and cut its price target to $138 from $170.
Deutsche Bank also lowered its rating to Hold from Buy and reduced its target to $138 from $155.
The latest results could offer some relief, but the lower profit outlook suggests investors may remain focused on whether PepsiCo can accelerate its North American turnaround while controlling rising costs.
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