PepsiCo Beats on Fourth-Quarter Earnings, But Warns of Cost Pressure

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  • PepsiCo topped analysts' expectations for quarterly earnings and revenue in the fiscal fourth-quarter, but gave a weaker-than-expected outlook for 2022.
  • The food and beverage giant said it is feeling the impact of inflation, as the price of cooking oil, packaging and transportation rise.
  • The company said it expects to return about $7.7 billion to shareholders in the coming year — dividends of $6.2 billion and share buybacks totaling $1.5 billion.

PepsiCo on Thursday beat quarterly revenue expectations by more than $1 billion, but warned that it is costing more to make its snacks and sodas and get them to store shelves.

But its full-year outlook fell short of what analysts predicted, and shares closed Thursday down 2.1% at $168.37.

Pepsi is feeling the impacts of inflation across its businesses. With Frito-Lay North America, the maker of Lay's potato chips and Cheetos, it has had to pay more for cooking oil and packaging. With PepsiCo Beverages North America, it said transportation and commodities have become pricier.

Some of those higher costs are getting passed on to customers. The company already hiked prices on some products.

Its rival, Coca-Cola is fighting similar headwinds.

So far, customers are still buying — despite those new price tags.

In an interview Thursday on CNBC's "Squawk Box," Pepsi's chief financial officer, Hugh Johnston, acknowledged cost challenges, but said the company has the brand loyalty and pricing power to "get through the year with our margins pretty well intact."

Johnston added on an earnings call Thursday that he anticipates Pepsi will raise prices again.

"As we sort of move into a world of higher inflation, I do expect that the category prices probably will go up," he said.

Pepsi said it also had higher advertising and marketing expenses in the fourth quarter for some brands, including Quaker Foods North America and PepsiCo Beverages North America.

Here's what the company reported compared with what Wall Street was expecting for the fiscal fourth-quarter ended Dec. 25, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.53 adjusted vs. $1.52 expected
  • Revenue: $25.25 billion vs. $24.24 billion expected

The food and beverage giant's net income for the quarter came in at $1.32 billion, or 95 cents per share. That's down from $1.85 billion, or $1.33 per share, a year earlier.

Excluding items, Pepsi earned $1.53 per share, topping the $1.52 per share expected by analysts surveyed by Refinitiv.

Net sales increased 12% to $25.25 billion, higher than expectations of $24.24 billion.

The company's organic revenue, which strips out the impact of acquisitions and divestitures, rose 11.9% in the quarter.

Frito-Lay saw its organic revenue increase by 13% for the quarter, as consumers bought sweet and salty snacks — including classics like Ruffles and newer innovations, such as Doritos 3D. Its health-conscious brands were a bright spot, too, with Bare, Smartfood and PopCorners all delivering double-digit net revenue growth in the fourth quarter.

Pepsi's North American beverage business reported organic revenue growth of 12%, as it developed new products like an energy drink with Starbucks along with selling key brands like Mountain Dew and Bubly.

Quaker Foods North America saw its organic revenue increase by 9%. The company said it tapped into Americans' desire for convenient meal solutions, such as Pasta Roni Heat & Eat and ready-to-eat cereals, while spending more time at home.

And among the company's global parents, Latin America saw the biggest quarterly jump, with 17% organic revenue growth. The company said Mexico, Brazil, Turkey, Spain, India, Egypt, China and Thailand had double-digit growth in the quarter.

For 2022, Pepsi said it expects organic revenue growth of 6%. The company said it projects fiscal 2022 core constant currency earnings of $6.67 per share, compared with analysts' expectations of $6.73, according to Refinitiv.

Pepsi said it expects to return about $7.7 billion to shareholders in the coming year — dividends of $6.2 billion and share buybacks totaling $1.5 billion.

Shares of Pepsi are up 23% over the past 12 months. The company's stock closed Wednesday at $171.94, bringing the company's market value to $237.73 billion.

Read the company's press release here.

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