PepsiCo Inc. (NASDAQ: $PEP) is a multinational food and beverage company based in New York. It has a portfolio of iconic snack and beverage brands, including Pepsi, Gatorade, Quaker Oats, Frito-Lay, and Tropicana. Founded in 1965 via a merger of Pepsi-Cola and Frito-Lay, PepsiCo aims to provide consumers with convenient and affordable foods and beverages.
On February 9th, 2024, PepsiCo reported solid results for Q4 and FY23. The company delivered organic revenue and earnings growth despite facing high inflation, volatility, and geopolitical tensions last year.
PepsiCo’s Key Q4 Financial Highlights
In the fourth quarter, PepsiCo reported a revenue of $27.85 billion, a 0.5% Y/Y decline, below the consensus estimate of $28.37 billion by 1.8%. PepsiCo’s net revenue reached $91.47 billion for the full year, a substantial 5.9% Y/Y growth. The quarter’s revenue decline was the first time the company has reported a quarterly net sales slump in four years.
In 2023, organic revenue, excluding the impacts of foreign exchange, acquisitions, and divestitures, experienced a noteworthy growth of 9.5%. For the fourth quarter, organic growth was 4.5%. Meanwhile, the core gross margin in the quarter saw a robust expansion of 97 basis points, driven by a 9% increase in average prices.
In the fourth quarter, PepsiCo reported an EPS of $0.94, a 152% Y/Y increase., while full-year EPS rose by 2% to $6.56. Notably, on an FXN basis, the core EPS surged 9% in Q4 to $1.78 beating estimates of $1.72. Meanwhile FY core EPS rose 14% to $7.62.
PepsiCo’s Divisional Performance in 2023
Frito-Lay North America posted a 2% operating profit increase in the fourth quarter. However, Quaker Foods’ operating profit plunged 79% due to product recall charges during the quarter. Conversely, Latin America saw a substantial 67% Q4 operating profit growth thanks to pricing increases. Despite currency headwinds, Europe increased Q4 operating profit through effective pricing.
For the full year, Frito-Lay’s operating profit rose an impressive 10%. However, Quaker Foods faced challenges, with FY operating profit dropping 19% primarily due to recalls. Latin America maintained positive momentum, as FY operating profit jumped 38%, while Europe experienced profit growth through strategic pricing in the full year. Asia Pacific contributed to PepsiCo’s global success, with FY operating profit surging 33%.
Resilience Amid Challenges in 2023
PepsiCo navigated a tumultuous 2023, facing economic instability and geopolitical tensions. Despite this, the company delivered strong results.
In 2023, PepsiCo increased prices and managed costs to counter inflationary pressures. The company generated productivity savings and operating leverage that further boosted profitability. Higher spending on advertising and marketing moderated earnings growth. Yet through pricing power, cost discipline, and operating efficiency, PepsiCo overcame macroeconomic challenges.
CEO Ramon Laguarta attributed PepsiCo’s success to strategic initiatives that bolstered supply chain agility and productivity. While some divisions like Quaker Foods faced unique hurdles, PepsiCo believes its diversified business leaves it well-positioned as markets stabilize.
PEP Stock Performance Snapshot
PepsiCo (NYSE: $PEP) shares today on Friday in the regular trading session decreased 3.06% from a previous closing price of $173.85, currently trading at $168.53 as of 11:50 am in New York.
The stock is trading below its 52-week high of $196.88 per share. However, it is trading near its 50-day Moving Average of $168.54 and below its 200-day Moving Average of $176.30. PEP stock is down 1.33% over the past 12 months, with 1.37 billion shares outstanding and a market cap of $239.21 billion.
Positive Outlook for 2024
PepsiCo provided an upbeat financial outlook for 2024. The company forecasts accelerated organic revenue and earnings growth compared to 2023.
PepsiCo expects at least 4% organic revenue growth in 2024. Core constant currency EPS is projected to increase by a minimum of 8%. Consequently, it expects a core EPS of $8.15, a 7% increase from the fiscal 2023 core EPS of $7.62. The company expects to return approximately $8.2 billion to shareholders through $7.2 billion in dividends and $1 billion in buybacks.
The strong profit outlook reflects assumptions of moderating input cost inflation and continued operating leverage. Pricing is also expected to remain positive in 2024. Additionally, PepsiCo announced a 7% dividend increase to $5.42 per share, representing its 52nd consecutive annual hike. The new dividend will be payable in June 2024.
Through sustained momentum across businesses, cost management, and strategic investments, PepsiCo aims to deliver robust financial performance and shareholder returns in the year ahead.
Analysts’ View: PepsiCo’s Resilience and Potential
PepsiCo’s latest earnings release highlights the company’s resilience amidst economic challenges in 2023. While some divisions faced specific difficulties, PepsiCo delivered revenue growth through strategic pricing initiatives and cost discipline. The company appears well-positioned moving into 2024, projecting accelerated organic revenue and earnings growth.
Analysts have a moderately optimistic outlook on PepsiCo shares. The average 12-month price target of $186 among seven analysts reflects a potential 10% upside from current levels. With some analysts more cautious than others, the consensus leans toward a buy stance on PepsiCo stock.
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