PepsiCo signals resilient demand as price increases boost forecasts

Oct 12 (Reuters) – PepsiCo Inc (PEP.O) on Wednesday raised its annual forecasts for revenue and profit on the back of fresh price increases for its sodas and snacks to battle runaway costs while signaling resilient demand.

Shares rose 4% after the company also beat third-quarter estimates that comes amid gloomy expectations for corporate results due to surging inflation and rising interest rates. Rival Coca-Cola (KO.N), set to report on Oct. 25, advanced 2%.

PepsiCo’s domination of the carbonated drinks market with Coca-Cola (KO.N) has helped it raise prices with little impact on demand, while a shift to eating more at home than at restaurants has buffered its snacks business.

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“In stressful times, we’re kind of the affordable luxury, so a simple snack or a beverage… is a relatively small amount of money,” Chief Financial Officer Hugh Johnston told Reuters.

“We see our consumer as being continuing to be remarkably healthy,” he said.

Bottles of Pepsi are pictured at a grocery store in Pasadena, California, U.S., July 11, 2017. REUTERS/Mario Anzuoni/File Photo

Higher prices boosted revenue across all segments, especially in its biggest two units of North America beverage and Frito-Lay. Average prices jumped 17% for the quarter ended Sept. 3, while organic volume slipped 1%.

The beverages business, its largest, which houses brands such as Mirinda, 7UP, and Gatorade, however, posted a 1% increase in volume.

PepsiCo’s results once again demonstrates its brand value strength in an inflationary environment, said Garrett Nelson, senior equity analyst at CFRA Research.

The company now expects 2022 organic revenue to rise 12%, from 10% earlier, the third time it has raised its forecast this year.

Annual core constant currency earnings per share forecast was raised to about $6.73 from $6.63, even as the company warned on continued freight and commodity price pressures and a stronger dollar.

For the quarter, PepsiCo earned a better-than-expected profit of $1.97 per share on revenue of about $22 billion.

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Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Sriraj Kalluvila

Our Standards: The Thomson Reuters Trust Principles.

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