Pepsico’s (PEP:NASDAQ) shares rose 4.3% to $162 on Wall Street after the sodas-to-snacks maker’s fourth quarter earnings topped analysts’ estimates. The food and drink giant reiterated FY26 guidance and said it plans to cut prices on snacking products to stimulate demand from cash-strapped consumers.
| Share price: $162 (+4.3%) | PE: 19.7 |
| Market cap: $215bn | Yield: 3.8% |
While Pepsico’s drink sales are improving, demand for its snacks remains sluggish with inflation-weary consumers in North America pushing back against higher prices. The impact of weight-loss drugs on consumer behaviour is another concern for investors.
Partly in response to pressure from feared activist Elliott, Pepsico plans to lower prices on products including Doritos, Lay’s, Tostito’s and Cheetos to ‘improve competitiveness and the purchase frequency of our brands’.
Sequential acceleration
The New York-headquartered food and drink powerhouse delivered Q4 EPS (earnings per share) of $2.26, ahead of the $2.24 Wall Street expected.
Net revenue grew by 5.6% to $29.34 billion, ahead of the $28.97 billion analysts had pencilled in, while organic revenue increased 2.1%.
‘Pepsico’s fourth quarter results reflected a sequential acceleration in reported and organic revenue growth, with improvements in both the North America and International businesses,’ explained chief executive Ramon Laguarta.
‘Accelerated net revenue growth and strong productivity savings led to strong operating margin expansion and double-digit EPS growth in the fourth quarter.’
Record savings
For FY26, Laguarta’s charge aims to deliver ‘a record year of productivity savings which will help fund investments to accelerate growth. As a result, we expect North America’s business performance to improve and the international business to remain resilient this year.’
PepsiCo reiterated the FY26 outlook provided back in December, projecting organic sales growth of between 2% to 4% and EPS growth in the 4% to 6% range.
To offset cost inflation, Pepsico pushed snack prices too high at the expense of volumes so the pricing reset seems sensible.
Though it trades at a premium rating to PepsiCo, our preference from an investment standpoint is for arch-rival Coca-Cola (KO:NYSE), the pure-play beverages behemoth where revenues have proved more predictable.
Read the press release here: https://www.pepsico.com/investors/earnings#2025
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