Pepsi Earnings Top Estimates Despite Higher Supply Chain Costs, Company Raises Revenue Forecast

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  • PepsiCo raised its full-year forecast after its latest quarterly earnings and revenue topped analysts' expectations.
  • The company's organic revenue climbed 9% in the quarter.
  • But growth of Pepsi's North American beverage unit moderated during the quarter.

PepsiCo on Tuesday raised its full-year forecast after its latest quarterly earnings and revenue topped analysts' expectations, despite higher costs and snarls in the supply chain.

Pepsi shares rose less than 1% in early trading.

Executives said supply chain disruptions and inflationary pressures for labor, commodities and transportation weighed on its fiscal third-quarter results. CFO Hugh Johnston told CNBC's "Squawk Box" the company has been raising prices on its beverages and snacks, and he expects another price hike in the fiscal first quarter of 2022.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.79 adjusted vs. $1.73 expected
  • Revenue: $20.19 billion vs. $19.39 billion expected

Net income for the quarter ended Sept. 4 came in at $2.22 billion, or $1.60 per share. That's down from $2.29 billion, or $1.65 per share, a year earlier.

Excluding items, the food and beverage giant earned $1.79 per share, topping the $1.73 per share expected by analysts surveyed by Refinitiv.

Net sales rose 11.6% to $20.19 billion, beating expectations of $19.39 billion. The company's organic revenue, which strips out the impact of acquisitions and divestitures, climbed 9% in the quarter.

Pepsi's North American beverage business reported organic revenue growth of 7% for the quarter. While the unit's organic sales have risen 10% on a two-year basis, growth has moderated since bouncing back 21% in the prior quarter. The company said that it saw double-digit net revenue growth for its food service business, which includes sales to restaurants, stadiums and college campuses. Worldwide, the company's away-from-home drink business is down just 10% from 2019 levels.

Frito-Lay saw its organic revenue increase by 5% as consumers maintained many of their pandemic snacking habits. Pepsi said that it gained market share in the salty and savory snack categories during the quarter.

Quaker Foods North America, which has been the most challenged of Pepsi's business units, saw its organic revenue increase by 1%. It was the only segment to report shrinking volume, which excludes the impact of price changes, and reported the largest drop in operating profit.

For the full year, Pepsi said it expects its organic revenue to increase by 8%, up from its prior forecast of 6% growth. The company reiterated its forecast for core constant currency earnings per share of 11% growth. Analysts were forecasting full-year earnings growth of 13% and a revenue increase of 9.5%.

Looking ahead to 2022, executives said they expect organic revenue growth and core constant currency earnings per share growth to be in line with the company's long-term objectives.

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