Categories Analysis, Consumer

PepsiCo (PEP) delivers a strong quarter buoyed by strong demand for variety and convenience

Core EPS is expected to increase 6% YoY to $6.63 in FY2022

Shares of PepsiCo Inc. (NASDAQ: PEP) stayed in green territory on Tuesday after the company delivered solid results for the first quarter of 2022. Both revenue and earnings beat expectations and the beverage giant raised its guidance for the full year. The stock has gained 22% over the past 12 months.

Quarterly performance

PepsiCo reported net revenues of $16.2 billion for the first quarter of 2022, which was up 9.3% from the year-ago period and ahead of analysts’ projections. On an organic basis, revenues grew 13.7%. The company saw broad-based growth across its categories and geographies which reflected the strength of its diversified portfolio. Core EPS grew 6% to $1.29, surpassing estimates. Core gross margin increased 5 basis points despite inflationary pressures.

Trends

PepsiCo managed to hold or gain share across many of its key global markets and saw strong gains in the US convenient foods business. Its global convenient foods business saw organic revenue growth of 14% while its global beverage business delivered organic revenue growth of 13%.

The company’s North America divisions witnessed double-digit organic revenue growth in Q1. The Frito-Lay segment gained market share in the macro-snack and savory snack categories during the quarter with many of the large brands like Doritos and Cheetos delivering strong growth.

PepsiCo continues to see strong consumer demand for variety, convenience and portion control as evidenced by double-digit revenue growth in its nutritious snacking brands such as PopCorners and Smartfood as well as its variety pack offerings. The company also launched its first product from its joint venture with Beyond Meat (NASDAQ: BYND), a plant-based jerky named Beyond Meat Jerky.

Within the Quaker Foods division, the company saw strong growth in rice and pasta, lite snacks, ready-to-eat cereal and oatmeal. The beverages segment benefited from strong performances by brands such as Pepsi, Mountain Dew and Gatorade. PepsiCo saw strong organic revenue growth across each of its international divisions.

Outlook

Looking ahead into 2022, PepsiCo expects its North American convenient foods and beverages business to remain resilient in general despite the inflationary pressures. Most of the international markets are also expected to perform well despite the geopolitical and economic challenges. The company raised its FY2022 outlook for organic revenue growth to 8% from the previously stated 6%. Core EPS is expected to increase 6% YoY to $6.63.

Competition

On Monday, PepsiCo’s rival Coca-Cola (NYSE: KO) reported its first quarter 2022 earnings results. Revenues increased 16% YoY to $10.5 billion while adjusted EPS rose 16% to $0.64. Both the top and bottom line numbers beat expectations.

Click here to access the full transcript of PepsiCo’s Q1 2022 earnings conference call

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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