Pepsi stock fell Tuesday after posting disappointing third-quarter revenue and cutting its sales growth forecast.
The beverage and snacks company posted core earnings per share of $2.31, slightly above the $2.29 analysts had expected, according to FactSet. Revenue, however, came in at $23.3 billion, below expectations of $23.9 billion.
For 2024, the company now sees a low-single-digit increase in organic revenue, compared to about a 4% increase previously.
The stock was down about 1% to $165.64 in the premarket session Tuesday.
“Strong cost controls aided our profitability, as we made incremental investments to improve our marketplace competitiveness,” said PepsiCo CEO Ramon Laguarta. “For the balance of the year, we will continue to invest in commercial activities and brand support to stimulate consumer demand,” Laguarta added.
The company continues to expect at least 8% core constant currency per-share earnings growth as it focuses on tightly managing costs to align with the weaker demand.
PepsiCo shares have fallen 1.6% this year, trailing the benchmark S&P 500 index, which is up 19%.
PepsiCo files its quarterly financial results on Tuesday, and investors will be watching for what management is doing to fizz up the soda stock.
Analysts have penciled in third-quarter core per-share earnings of $2.29 and sales of $23.9 billion, according to FactSet. The company notched per-share earnings of $2.25 and sales of $23.5 billion in the same three months last year.
Ahead of the report, BofA Securities cut its price target to $185 from $190, lowered estimates, and reiterated its Buy rating on Sept. 30.
A team of analysts, led by Bryan Spillane, trimmed back estimates to reflect weaker-than-expected demand within PepsiCo’s snacks and beverages segments in North America.
Spillane and his colleagues believe the market will be less focused on quarterly results and more on the state of the industry and how PepsiCo is working through that.
“PEP is historically patient and thoughtful when its growth algorithm is challenged,” the analysts wrote. “It also has a history of bold actions when the playing field is shifting.”
“A year of revenue disappointments and some high-level management departures suggest it’s time to step back and assess,” they added.
The need for a refresh isn’t lost on PepsiCo’s brass. In the second quarter, sales came in weak.
On that most recent earnings call in July, CEO Ramon Laguarta talked about a “much more price-conscious” shopper and underlined the need for “some new entry-price points.”
The stock has shrugged this year. It’s off 1.6%, compared to Coca-Cola’s 18% gain.
Still, don’t count on PepsiCo’s new numbers moving the stock much, said Jay Woods, chief global strategist at Freedom Capital Markets.
He pointed out the stock’s “history of lackluster reactions to earnings.”
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