Pepsi raises profit guidance despite flat volumes
Pepsico has upgraded its profit guidance for the third consecutive time in a row despite reporting a decline in volumes due to sticky inflation.
The Coca-Cola rival said that its third-quarter revenue grew organically by 8.8 per cent to $23.5bn (£19.16bn) and underlying profit grew 12.1 per cent to $4.0bn.
Pepsi, which sells favourites such as Walkers crisps and Doritos, now said it expects core earnings per share of $7.54 an 11 per cent increase on its previous guidance.
But Pepsi volumes fell in the quarter, as inflation-driven price hikes have weakened demand for its products.
Pepsi executives reportedly told analysts on a conference call that the company has also been shrinking portions and making smaller value packs to drive more transactions, according to CNBC.
North American volumes in the carbonated drinks fell six per cent in the quarter and total volumes in its confectionery arm slipped 1.5 per cent.
Ramon Laguarta, chief executive of Pepsico said: “We are pleased with our performance as our businesses and associates displayed tremendous agility and resilience across geographies and categories in an evolving and dynamic environment.”
Aarin Chiekrie, equity analyst at Hargreaves Lansdown said that Pepsi’s Tuesday results were “solid”.
“Sales increased across all regions third quarter, driven almost entirely by price hikes. And unlike major rival Coca-Cola, it doesn’t limit itself to just soft drinks.”
“Pepsi sells snack favourites like Walkers crisps, Doritos, and even some more unexpected names like Quaker Oats.”
He added: “But constant price hikes are beginning to take their toll, having negative impacts on food volumes which is causing some concern in the market and has seen Pepsi’s valuation move lower in recent months.
“The rate of price hikes is likely to slow moving forward to help bring some stability back to the volume picture.
“But good progress is being made on cost-cutting initiatives which is helping to offset this and keep Pepsi’s underlying operating profit growing at double-digit rates.”
Morning Wire has contacted Pepsico for comment.