PepsiCo increased on Wednesday its year projections for revenue and profit on the strength of new pricing increases for its beverages and snacks, in an effort to combat spiraling costs and signal steadfast demand.
Shares increased 4% as the company also exceeded third-quarter estimates, which came amid pessimistic predictions for corporate earnings due to rising interest rates and inflation. Competitor Coca-Cola, which will report on October 25, increased 2%.
With Coca-Cola’s dominance of the carbonated beverage industry, PepsiCo has been able to boost prices without significantly impacting demand, and the trend toward dining more at home rather than out in restaurants has protected its snack business.
Hugh Johnston, the chief financial officer, told Reuters that “in difficult times, we’re kind of the accessible luxury, so a simple snack or a beverage… is a relatively little amount of money.”
He stated, “We see our consumer as continuing to be extremely robust.”
Revenue increased across all divisions, but especially in its two largest businesses, North America beverage and Frito-Lay. For the three months that ended on September 3, average prices increased 17%, but organic volume decreased 1%.
However, its largest division, the beverages industry, which is home to brands like Mirinda, 7UP, and Gatorade, reported a volume growth of 1%.
According to Garrett Nelson, senior equities analyst at CFRA Research, PepsiCo’s results once again highlight its ability to maintain a strong brand value in an inflationary climate.
The company has increased its prediction three times this year and now anticipates organic revenue to increase 12% from 10% in 2022.
Even though the company issued a warning on ongoing challenges on freight and commodity prices as well as a higher dollar, the annual core constant currency earnings per share outlook was increased to approximately $6.73 from $6.63.
On revenue of almost $22 billion, PepsiCo generated a better-than-anticipated profit of $1.97 per share for the quarter.
