PepsiCo raises revenue outlook after sales and profit top expectations

PepsiCo on Tuesday raised its revenue outlook for the year as consumers snacked on more Doritos chips and drank more Gatorade in its latest quarter even as prices increased.

Shares of the company rose less than 1% in premarket trading.

The company’s margins shrank as it faced higher freight and commodity costs during the quarter. CEO Ramon Laguarta said in prepared remarks that Pepsi is accelerating its cost management initiatives and using “mix and assortment solutions,” like smaller sizes for its variety packs.

“We are facing inflation like everyone else, and we think that is going to persist for a while, but we are taking enough pricing to be able to manage the inflation, and our focus is really much more on how do we drive costs out of the business,” Hugh Johnston, PepsiCo’s chief financial officer, said on CNBC’s “Squawk Box.”

While higher costs weighed on its profits, the food-and-beverage giant saw a larger hit from the Russia-Ukraine war. It reported a $1.17 billion charge for the quarter related to the conflict. In the wake of the Kremlin’s invasion of the neighboring country last quarter, Pepsi said it was pausing sales in Russia except for some essential items, like baby formula. The company is now trying to discontinue or reposition 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 strips out the impact of acquisitions and divestitures, climbed 13% in the quarter.

For 2022, Pepsi is now expecting organic revenue growth of 10%, up from its prior forecast of 8%. This marks the second consecutive quarter that the company has hiked its revenue forecast without updating its expectations for its earnings. Pepsi is still forecasting core constant currency earnings per share growth of 8%.

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