PepsiCo Faces Domestic Headwinds Amid Q1 Earnings Pressure
PepsiCo is expected to report softer Q1 2024 results as ongoing challenges in the U.S. market weigh on performance, according to a recent note from RBC Capital Markets. Despite resilient international business trends, domestic softness—particularly in the beverages division—is likely to be a drag on overall earnings.
RBC analysts anticipate Q1 organic revenue growth of 2.5%, a deceleration from the 4.5% gain reported in Q4 2023. This slowdown reflects volume declines in North America and fewer pricing tailwinds. PepsiCo’s North America beverage division is under pressure from weakened consumer demand, with some categories seeing volume softness amid persistent inflation and a cautious retail environment.
Although the company’s North American snacks portfolio, led by Frito-Lay, remains relatively stable, volume growth has also moderated. Analysts suggest this may signal the end of the significant pricing-led momentum that had supported top-line growth through much of 2022 and 2023.
“While challenges continue in the North American beverage segment, we believe international trends remain solid,” says RBC. The firm also notes that PepsiCo’s international business, particularly in LatAm and AMESA (Africa, Middle East, South Asia), continues to deliver strong volume-led growth, helping balance domestic pressures.
Key questions ahead of the earnings announcement include the company’s expectations for volume rebound, the pricing environment, and margins outlook. Analyst focus will also center on PepsiCo’s reaffirmation—or adjustment—of its FY24 guidance, particularly in light of changing shipment trends and potential promotional shifts.
Despite near-term U.S. weakness, RBC maintains an “Outperform” rating on PepsiCo shares with a price target of $180, noting resilient international performance and long-term brand strength as positives. The company’s focus on innovation, supply chain investments, and productivity initiatives may help mitigate volatility and support margin stability.
PepsiCo’s performance will be closely watched by FMCG stakeholders as a barometer of consumer demand behaviors and pricing elasticity in key developed markets. First-quarter results, expected soon, could set the tone for broader CPG earnings in 2024.