PepsiCo profit misses estimates as North America weighs on quarter

PepsiCo reported second-quarter adjusted earnings of $2.20 a share, one cent below Wall Street’s expectation, while revenue of $24.18 billion exceeded analysts’ estimates. The results showed continued strength outside the United States, but weaker performance in North American food and beverage businesses limited the quarter’s earnings momentum.

Analysts surveyed by LSEG had expected adjusted earnings of $2.21 a share and revenue of $23.95 billion. PepsiCo said net sales rose 6.4% from a year earlier to $24.18 billion.

The company posted net income attributable to PepsiCo of $2.98 billion, or $2.18 a share, compared with $1.26 billion, or 92 cents a share, in the same period last year. On an adjusted basis, which removes restructuring and impairment charges and other items, earnings were $2.20 a share, according to the company.

International demand offsets a softer U.S. consumer

PepsiCo’s beverage and snack portfolio benefited from overseas demand, according to the company, helping revenue come in above the market consensus. Its North American businesses were the weaker part of the report, with the company pointing to pressure on household spending.

Chief Executive Ramon Laguarta said in prepared remarks published on PepsiCo’s website that U.S. food and beverage categories slowed during the quarter as consumers adjusted spending in response to inflationary pressure. The comments add to evidence that large consumer staples companies are facing a more cautious North American buyer after several years of price increases across groceries and packaged goods.

Organic revenue rose 2.4% in the quarter, PepsiCo said. That measure strips out the effects of acquisitions, divestitures and currency swings, giving investors a view of how the existing business performed before changes in exchange rates or portfolio structure. For a company with global sales, the distinction is material because reported revenue can move with the dollar even when local demand is steadier.

Guidance held steady

PepsiCo reiterated its full-year forecast, according to the company. The reaffirmation indicates management did not change its annual outlook despite the quarterly profit miss and weaker conditions in North America.

The quarter leaves investors weighing two forces in the business: international demand for PepsiCo’s snacks and drinks, which supported sales, and pressure on U.S. consumers, which weighed on profitability. The company did not provide additional forecast figures in the reported materials beyond reiterating its full-year view.

This story draws on original reporting from CNBC.