American beverage company PepsiCo has always kept its eye on the customer. So, it came as no surprise that they spotted the health trend way before any other company did. They made changes to their product lines, did some introspection and market research and had the consumer in the bag. And this was reflected in the latest Q4 2022 PepsiCo earnings report as the snack and beverage manufacturer posted strong revenue growth.
PepsiCo’s earnings were published on February 9 and in a recorded message CEO Ramon Laguarta mentioned that the strong results have given the company a confidence boost about its future.
The company’s earnings report benefitted from a hike in prices for its products, as inflationary pressures increased supply chain costs, which could have cut into profits. In the last few quarters, the beverage-maker hiked its rates, as it faced rising prices for resources, logistics, and labor.
Although the earnings report exceeded expectations, the company admitted that it will keep an eye out for changing consumer behavior as people deal with tightening budgets.
PepsiCo Earnings Surpass Expectations
The Doritos-maker expects growth to continue this year, as people seem to give up big-ticket items for comfort food and snacks. Although prices rose by an average of 15%, PepsiCo reported an 11% increase in sales and are optimistic the trend will continue.
Experts pointed out that although food inflation has started to decline prices are still high and companies have passed on rising costs to consumers. PepsiCo had also raised its prices as raw materials and transport became costly in the last one year. For consumers wondering whether they will subject for more price hikes, PepsiCo CFO Hugh Johnston told Reuters that the company already has most of the “price increases for the year already in place.”
PepsiCo’s Frito-Lay North America snacks business reported a 25% increase in revenue. Consumers are “nervous right now so they don’t necessarily want to spend on big-ticket items like cars and personal technology,” Johnston, said in an interview Thursday. “But they still want affordable treats in their lives.”
As per Wall Street estimates PepsiCo was expected to bring in $26.88 million in net sales. The actual value stood at $27.99 billion. PepsiCo Beverages North America Sales were at $8.1 billion vs the expected $7.94 billion.
International organic revenue growth stood at 16% while overall organic revenue growth hit 14.4%. Core constant currency EPS growth was recorded at 11%. The biggest drop in operating profit was observed in Europe at 420% while it increased in Latin America to 5%.
Despite the positive earnings report, the company made a cautious annual profit forecast much less than Wall Street estimates. The company is worried that rising living costs combined with price hikes of its goods will slow down demand in the coming months.
On an adjusted basis, the company earned $1.67 per share in the fourth quarter, beating estimates of $1.65, according to Refinitiv data.
Future Prospects
The company has continued to prioritize changing customer needs and adapt to their tastes. Laguarta is hopeful that the Frito-Lays maker will be able to carry the 2022 momentum forward.
For 2023, PepsiCo is projecting a 6% increase in organic revenue and 8% increase in core constant currency earnings per share.
The company also announced a 10% increase in its annualized dividend starting from June 2023, delighting stakeholders. Plans are also in place to repurchase approximately $1.0 billion worth of shares.
PepsiCo’s top brass is hopeful that the North American market will be resilient while its growth will primarily be driven by international markets in 2023.
Although only time will tell how PepsiCo will fare, the American multinational has always been quick to adapt to local needs and encouraged innovation. These values and principles are expected to hold the company in good stead as it braces for the long-term effects of inflation in 2023.
