8 October 2024
If you are covering PepsiCo’s latest results, please see the following comment from Chris Becket, head of equity research at Quilter Cheviot:
"PepsiCo’s latest results reflect a challenging environment, and the positive share price response today says more about lowered expectations than any true momentum in their recent performance. The North American Frito-Lay snacks division, in particular, has struggled. Although PepsiCo points to a sequential improvement, the declining sales suggest they may be on the wrong side of changing Gen Z consumer trends, which is a concern.
"Internationally, while growth continues, there are signs of weakness creeping in. On the positive side, PepsiCo has managed costs effectively, maintaining strong margins even while implementing price increases around the 3% mark to keep up with inflation. However, declining volumes could pose a serious problem. In a consumer business, shrinking sales volumes can quickly erode the underlying economics, especially as price-sensitive U.S. consumers continue to cut back—a trend we’ve observed in other companies recently. With snack and soft drink volumes both down the report doesn’t offer much in the way of bright spots.
"PepsiCo’s decision to cut revenue guidance while maintaining their earnings forecast suggests they’re relying on cost controls to bridge the gap. This strategy may buy some time, but the pressures on consumer demand remain an underlying concern."
