PepsiCo (NASDAQ:PEP) reported second-quarter core profits that surpassed analyst estimates, driven in part by strong performance from its international division, despite operating in a “challenging” business environment.
Consumer staples firms like PepsiCo face numerous challenges, including concerns on Wall Street that broad U.S. tariffs may prompt consumers to cut back on spending and opt for cheaper grocery alternatives.
Additional worries involve potential regulatory pressures from U.S. health authorities and shifting consumer behavior, particularly with the rise of new obesity medications that could reduce demand for snack products critical to Pepsi’s revenue.
CEO Ramon Laguarta commented that Pepsi’s North American units have focused on enhancing product innovation and achieving cost efficiencies to boost “execution and competitiveness” amid these headwinds. The region’s food segment saw organic sales fall by 2%, while the beverage segment’s revenue inched up 1%.
Internationally, Pepsi’s beverage division delivered a 5% sales gain, with revenue growth of 6% in Latin America and 7% across Europe, the Middle East, and Africa.
Overall, group net revenue for the 12 weeks ending June 14 increased 1% year-over-year to $22.73 billion, exceeding the forecast of $22.32 billion.
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.”
Core earnings per share—at the company behind brands such as Lay’s and Mountain Dew—came in at $2.12, down from $2.28 a year earlier but beating Bloomberg consensus.
PepsiCo maintained its forecast of a low single-digit rise in annual organic revenue and expects core constant-currency EPS to be “approximately even with the prior year.”
The company also revised its currency impact outlook, now anticipating a 1.5 percentage point headwind to annual net revenue and core EPS, an improvement from the prior guidance of a 3-point negative impact.
Shares of PepsiCo rose slightly in early U.S. trading on Thursday.
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