PepsiCo Shares Drop After Cautious Revenue Outlook, Margin Pressures
PepsiCo stock fell nearly 3% on Monday following its first-quarter earnings release, as investors responded to the company’s muted revenue guidance and ongoing cost pressures. Despite solid profit growth, the beverage and snack giant signaled slower sales momentum and narrowing margins heading into the rest of the fiscal year.
Net revenue for the quarter grew 2.3% year over year to $18.3 billion, matching Wall Street expectations. Organic revenue, which excludes currency fluctuations and acquisitions, rose 2.7%—a notable deceleration from the double-digit growth rates seen over the last two years. Management attributed the slowdown to moderating consumer demand, particularly in North America, where volume softness impacted the Frito-Lay and Quaker Foods divisions.
While pricing initiatives supported top-line results, PepsiCo noted that those increases are now tapering as inflation eases and price sensitivity rises among consumers. The company reported flat global beverage and snack volumes, indicating that it is relying less on price hikes and more on stabilization strategies as retail partners and consumers push back on further inflation-driven increases.
Despite the revenue slowdown, PepsiCo delivered a 12% increase in core earnings per share (EPS), reaching $1.61, ahead of analysts’ expectations. Cost-cutting initiatives and supply chain optimization helped offset some of the margin compression caused by elevated commodity and transportation expenses. Nevertheless, operating margin contracted modestly to 14.2% from 14.6% a year ago.
Looking ahead, PepsiCo reaffirmed its full-year forecast of 4% organic revenue growth, down significantly from the 9.5% posted in 2023. The company maintained its EPS target of $8.15, reflecting a continued focus on profitability amid tougher market conditions. FMCG analysts view the cautious outlook as a sign that food and beverage multinationals are entering a more volume-sensitive phase after two years of inflation-led pricing power.
As key categories like salty snacks and carbonated beverages face pricing fatigue and increased competition from private-label brands, PepsiCo’s near-term performance will likely hinge on its ability to drive operational efficiencies and boost demand through innovation and strategic marketing investments.
Shares are down approximately 10% year to date, underperforming peers in the packaged goods sector as