Business|PepsiCo Defies Fears of Consumer Slowdown With Strong Earnings and Forecast
https://www.nytimes.com/2022/10/12/business/pepsi-earnings-inflation.html
Quarterly results provided a sign that shoppers continued to spend despite high inflation squeezing their wallets.
PepsiCo reported robust quarterly earnings on Wednesday, and raised its forecasts for sales and profit this year, in a sign that shoppers continued to spend on soda and snacks despite rapidly rising prices squeezing household budgets.
The company, which owns Doritos, Gatorade and other brands along with its namesake soft drink, said that third-quarter revenue grew 9 percent from a year earlier and that profit expanded by more than 20 percent. Both results were higher than analysts had expected, amid fears that high inflation, particularly for food and other staples, would lead consumers to cut back on purchases significantly.
“Our global business momentum remains strong,” Ramon Laguarta, PepsiCo’s chief executive, said in a statement.
The company raised its full-year forecast for revenue growth for a third time this year, to 12 percent from 10 percent. In part, that reflects increasing prices for its products. Notably, the company also upgraded its forecast for profit growth this year, to 10 percent from 8 percent, suggesting that it was managing to balance its own rising costs and the prices it charges consumers without denting its bottom line.
“Our brands are being stretched to higher price points, and consumers are following us,” Mr. Laguarta said on a call with analysts.
But as in recent quarters, growth in PepsiCo’s revenue outpaced sales volumes, as measured by the number of cans of soda and bags of chips that consumers were willing to buy. At its Frito-Lay North America unit, for example, revenue in the third quarter increased 20 percent from a year earlier while volumes fell 2 percent, meaning the company was able to earn more from selling less.
PepsiCo’s profit would have been bigger if not for the strength of the U.S. dollar, which shaved 3 percent from earnings growth in the third quarter, as the company’s extensive sales abroad were worth less when converted into dollars.
PepsiCo is one of the first big companies to report their earnings each quarter, so investors pay particular attention to its finances as they look for clues about how other companies will fare. Conflicting signals have made it hard to predict where corporate earnings are headed this quarter, as increasingly dire predictions about the effect that rising interest rates will have on the global economy clash with some signs of moderating inflation and a resilient labor market.
PepsiCo’s better-than-expected results, and bullishness about the future, provided a positive start to the earnings season, piercing some of the gloom that was reflected in the stock market’s losses for five straight days through Tuesday, erasing a rally early in the month. PepsiCo’s stock rose more than 4 percent in trading on Wednesday, and the S&P 500 fell 0.3 percent.
Other corporate bellwethers reporting earnings this week include Delta Air Lines on Thursday and JPMorgan Chase on Friday.
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https://digitalalaskanews.com/pepsico-defies-fears-of-consumer-slowdown-with-strong-earnings-and-forecast/
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