- PepsiCo’s Q4 2022 earnings and revenue exceeded analysts’ expectations due to higher prices for its snacks and drinks. The company posted earnings per share of $1.67, beating the expectations of $1.65, and revenue was $28 billion, exceeding the expectations of $26.84 billion. However, net income was down to $518 million, compared to $1.32 billion in the same period the previous year, due to write-downs on brands such as SodaStream and Pioneer Foods.
- Despite a decline in demand for its products, PepsiCo saw an increase in volume for Pepsi Zero Sugar, which rose by 26%. The company experienced a 2% volume drop in its food business globally as the price hikes of 15% only impacted consumer demand slightly. On the other hand, the operating profit for Frito-Lay North America increased by 9%, while the operating profit for Quaker Foods North America decreased by 3% due to higher commodity costs and advertising expenses. PepsiCo Beverages North America operating profit increased by 13% due to effective net pricing and higher joint venture income.
- In Europe, the operating profit decreased by 420% due to impairment charges related to the SodaStream brand, higher commodity costs, and operating cost increases. The profit performance was negatively impacted by restructuring and impairment charges by 10%.
In Africa, Middle East, and South Asia, the operating profit decreased by 148% due to impairment and other charges from the decision to sell non-strategic brands and investments, as well as higher commodity costs, operating costs, and advertising expenses. The decrease was partially offset by revenue growth and productivity savings. - PepsiCo is projecting inflationary pressure to persist into 2023. The company estimates it will increase in organic revenue by 6% and growth in core constant currency earnings per share for 2023 by 8%.
- While PepsiCo has strong pricing power, it warned that consumers may become more price-sensitive going forward. The company is considered relatively recession-proof and is a consistent dividend payer, having announced a 10% dividend increase, bringing its annual dividends to $5.06 per share. This also marks the 51st consecutive annual dividend increase for the company. We hold the share in managed portfolios.
By Lee Kern