PepsiCo (PEP) earnings in the second quarter of 2022 beat Wall Street estimates

PepsiCo on Tuesday raised its revenue forecast for this year as consumers ate more Doritos chips and drank more Gatorade in the last quarter even as prices rose.

The company’s shares rose less than 1% in pre-market trading.

Here’s what the company reported compared to what Wall Street was expecting, based on an analyst survey by Refinitiv:

• Earnings per share: $1.86, adjusted against $1.74 expected
• Revenue: $20.23 billion vs. $19.51 billion forecast

PepsiCo reported second-quarter net income for the company of $1.43 billion, or $1.03 per share, down from $2.36 billion, or $1.70 per share, a year ago.

The company’s margins narrowed as it faced higher freight and merchandise costs during the quarter. CEO Ramon Laguarta said in prepared remarks that PepsiCo is accelerating cost management initiatives and is using “diverse and mixed solutions,” such as smaller sizes of diversified packages.

While higher costs affected its profits, the food and beverage giant saw an even bigger hit from the Russo-Ukrainian War. It reported a cost of $1.17 billion for the quarter related to the conflict. In the wake of the Kremlin’s invasion of the neighboring country last quarter, PepsiCo said it had temporarily halted sales in Russia except for some essential items, such as infant formula. The company is now trying to discontinue or reinstate some of its Russian juice and dairy brands.

Excluding items, the company earned $1.86 per share. Net sales rose 5.2% to $20.23 billion. Organic revenue, which removes the impact of acquisitions and divestitures, increased 13% in the quarter.

Frito Lay North America reported organic revenue grew 14% as Cheetos and Doritos sales grew but volume, which excludes the impact of pricing or currency volatility, was down 2%. Lagorta said the division gained market share during the quarter.

The company’s North American beverage unit saw organic revenue growth of 9%, but its volume declined 1%. Gatorade, Aquafina, and Levotre saw double digit growth in the quarter.

Quaker Foods North America, which typically lags behind the Pepsi portfolio, was the only domestic segment to report volume growth for the quarter. Its organic revenue was up 18%, buoyed by double-digit growth in rice, pasta, oatmeal and biscuits. Volume increased by 2%.

For 2022, PepsiCo now expects organic revenue growth of 10%, up from its previous forecast of 8%. This marks the second consecutive quarter that the company has raised its revenue forecast without updating its earnings forecast. PepsiCo continues to expect core constant-currency earnings per share to grow by 8%.

Lagorta said the company expects business in North America to be resilient and most of its international markets to be robust, despite macroeconomic and geopolitical volatility.

Read the full earnings report here.