PepsiCo Beats Q3 Estimates, But Slumping US Demand Raises Flags
International growth offsets a 2% drop in North American snack volumes and a 3% decline in beverages, fueling investor caution.
PepsiCo, Inc. (PEP) reported third-quarter financial results that narrowly surpassed Wall Street expectations, but the positive headline numbers were overshadowed by concerning volume declines in its core North American markets.
The global food and beverage giant posted an , edging out the consensus estimate of $2.26. Revenue came in at $23.94 billion, just ahead of the ~$23.9 billion analysts had forecasted. While international business segments provided a crucial lift, performance in the company's home market signaled growing consumer headwinds.
The primary cause for concern stemmed from weakening demand in the United States. The company's North American beverage division saw volumes fall by 3%, while its Frito-Lay North America snack unit experienced a 2% volume decline. This downturn suggests that price hikes, which have bolstered revenue figures for much of the consumer goods sector, may be meeting resistance from household budgets.
Despite the domestic softness, PepsiCo affirmed its financial guidance for the full fiscal year 2025, projecting low-single-digit organic revenue growth. The company’s ability to hold its outlook steady is largely thanks to robust performance in international markets, which helped to counterbalance the slowdown in the U.S. and Canada. Foreign exchange rates also provided a modest tailwind, contributing positively to net revenue and EPS.
The mixed results come at a critical time for the company. Ahead of the earnings release, several analysts had already trimmed their price targets, citing volume pressures and a lack of near-term catalysts. JPMorgan and Citi, for example, while maintaining 'Neutral' and 'Buy' ratings, respectively. The report also lands as activist investor Elliott Investment Management has reportedly taken a stake, potentially advocating for strategic changes.
For investors, PepsiCo's third quarter presents a complex picture. While the company demonstrates resilience through its global diversification, the cannot be ignored. The market will now watch closely to see if the North American slowdown is a temporary blip or the start of a more challenging trend for the snack and soda powerhouse.