PepsiCo has delivered a better-than-expected third quarter but tempered the mood by cutting its full-year profit forecast, leaving investors with a classic good news, bad news statement that sent the shares up around 1% in premarket trading.
Revenue grew 5.6% year on year to $25.27 billion, nudging past the $25 billion Wall Street had pencilled in, while adjusted earnings per share of $2.34 came in ahead of the $2.29 consensus.
Tariff refunds of $178 million provided a $178 million boost in the quarter.
The sting was in the guidance. PepsiCo now expects core earnings per share to grow by 2.5% to 3% for the full year, a sharp reduction from the previous target of 5% to 7% growth at the low end.
On revenues, the company guided to the high end of its roughly 6% growth range.
Chief executive Ramon Laguarta acknowledged the company is running hard to rebuild momentum, particularly in North America, where a price cut earlier this year knocked core operating margins by 280 basis points.
The company now plans to reverse course with price increases of around 15% to offset rising input costs, while simultaneously identifying further structural cost reductions to fund growth investment.
Product innovation is showing some early promise, with protein-focused snacks, Lays Baked with Olive Oil and lower-sugar drinks including Gatorade and zero-sugar Pepsi Treats cited as bright spots.
The results kick off an earnings season that FactSet estimates will show S&P 500 profits grew 29.5% in the third quarter, which if confirmed would be a third straight quarter of growth above 25%.
