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Shares of PepsiCo Inc. (NASDAQ: PEP ) rose more than 1% on Thursday after the company reported earnings results for the fourth quarter of 2022. The results exceeded expectations and the outlook did not disappoint either. The company benefits from its growth investments as well as its strong portfolio. Here are the key takeaways from the report:
Better results than expected
PepsiCo’s revenue rose 11% year over year to $28 billion in Q4 2022, beating estimates of $26.8 billion. Core EPS rose 9% YoY to $1.67, beating projections of $1.65. Organic revenue rose 14.6%, helped by strong performance from the beverage and convenience food businesses, despite high inflation and macroeconomic headwinds.
Portfolio performance
During the fourth quarter, Frito-Lay’s North America segment grew organic revenue by 17%, helped by double-digit revenue growth from brands such as Doritos, Cheetos, Lay’s and Ruffles. The company also experienced double-digit revenue growth in small and nutritious brands such as PopCorners and SunChips.
Frito-Lay’s business experienced strong revenue growth across all channels including large format, food service, and convenience and gas during the quarter. The growth was also aided by product innovation as the company launched new flavors and versions of its leading brands. These include Frito-Lay Minis, which are bite-sized versions of Doritos, Cheetos and Sun Chips snacks, new flavors such as tangy sour, ketchup and spicy mustard in Doritos, as well as Cheetos Bolitas.
Quaker Foods North America posted 10% growth in organic revenue for the fourth quarter helped by strength in the lite snacks, rice and pasta, and ready-to-eat cereal categories. PepsiCo Beverages North America saw organic revenue growth of 10% for the fourth quarter helped by strong demand for brands such as Pepsi, Mountain Dew, Gatorade and Aquafina.
In Q4, the convenient international food and beverage business delivered organic revenue growth of 19% and 8%, respectively, helped by strength and resilience in emerging and developing markets.
Outlook
In 2023, PepsiCo expects its North American business to remain resilient and its international business to do well. The company expects organic revenue to grow 6%, while core constant currency EPS will grow 8%.
Foreign currency headwinds are expected to impact net revenue and core EPS by approx. 2 percentage points. In FY2023, core EPS is estimated at $7.20, which represents a 6% increase from core EPS of $6.79 in FY2022.
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