PepsiCo Shares Drop on Weak Outlook

PepsiCo (NASDAQ:PEP) announced its full-year expectation for organic revenue growth to be at least 4%, which falls below the consensus forecast of 5.2%. The company highlighted diminishing returns from previously increased prices as a factor. As a consequence, the company’s shares fell more than 3% on Friday.

The inflation surge following the COVID-19 pandemic contributed to Pepsi's revenue growth, but the advantage from these price increases is starting to diminish, partly due to rising interest rates.

CEO Ramon Laguarta noted that the market environment is evolving as the company enters the 2024 fiscal year, with consumer behaviors shifting back to pre-pandemic patterns and the impact of net revenue realization expected to moderate in response to easing inflationary pressures.

For the fourth quarter, Pepsi reported a rise in core earnings per share to $1.78, up from $1.67 the previous year. However, increased expenses, including those for cooking oil and seasonal ingredients, negatively impacted the profit margin by eight percentage points in its key Frito-Lay North America segment.