Food & Beverage

PepsiCo earnings beat expectations as price hikes boost snack and beverage sales

Key Points
  • PepsiCo's fourth-quarter earnings and revenue topped Wall Street's estimates.
  • The food and beverage giant's price hikes to mitigate inflation buoyed sales for snacks and drinks, but the strategy has also hurt demand.
  • Frito-Lay North America reported flat volume for the quarter, despite double-digit revenue growth for Doritos, Cheetos and many other brands.

In this article

Bottles of Pepsi soda at a Walmart Supercenter in Austin, Texas, Dec. 6, 2022.
Brandon Bell | Getty Images

PepsiCo on Thursday reported quarterly earnings and revenue that beat analysts' expectations, fueled by higher prices for its snacks and drinks.

But the company saw volume fall 2% across its food business worldwide as those price hikes hurt consumer demand. Still, Pepsi plans to sharpen its "revenue management," which typically means raising prices, based on projections that inflationary pressure will persist in 2023.

Shares of the company rose more than 1%.

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

  • Earnings per share: $1.67 adjusted vs. $1.65 expected
  • Revenue: $28 billion vs. $26.84 billion expected

The food and beverage giant posted fourth-quarter net income of $518 million, or 37 cents per share, down from $1.32 billion, or 95 cents per share, a year earlier. Pepsi said it wrote down some of its brands, including SodaStream and Pioneer Foods, due to higher interest rates.

Excluding those impairment charges, gains from selling its juice business, write-downs of its Russian assets and other items, Pepsi earned $1.67 per share.

Net sales rose 10.9% to $28 billion. The company's organic revenue, which strips out the impact of acquisitions and divestitures, climbed 14.6% in the quarter.

But demand for Pepsi products actually shrank during the quarter. Volume, which excludes pricing and currency fluctuations, fell 7% at Quaker Foods North America and 2% at its North American beverage division.

One bright spot was Pepsi Zero Sugar, which saw its volume climb 26%. And executives have high hopes for the drink. The company announced in mid-January that it revamped the formula to match the Western Europe version more closely, roughly a year after rival Coca-Cola updated Coke Zero's recipe. As part of the relaunch, Pepsi is running two Super Bowl ads on Sunday highlighting Pepsi Zero Sugar.

Frito-Lay North America reported flat volume for the quarter, despite double-digit revenue growth for Doritos, Cheetos, Smartfood and many of its other brands.

Looking to 2023, Pepsi is projecting a 6% increase in organic revenue and 8% growth in its core constant currency earnings per share. Wall Street is anticipating net sales growth of 3.5% and earnings per share growth of 7.3%.

"Would we expect volumes to be down? Perhaps they'll be down little bit," CFO Hugh Johnston told analysts on a conference call.

He added that there may be a "mild" recession in the U.S. and some developed markets in the second half of 2023.

Read the full PepsiCo earnings report here.