Shares of PepsiCo Inc. slumped premarket Friday, after the beverage and snack giant reported a surprise decline in revenue, marking the first miss of expectations in at least five years amid weakness in the North America businesses.
The company reported an increase in operating earnings, with growth in Frito-Lay North America, and announced a 7% increase in the annual dividend.
The stock
PEP,
fell 2.1% to pull back from a five-month high in premarket trading, setting it up the worst one-day post-earnings performance since fourth-quarter 2021 results were reported on Feb. 10, 2022, according to FactSet data.
Net income jumped to $1.3 billion, or 94 cents a share, from $518 million, or 37 cents a share, in the same period a year ago. Excluding nonrecurring items, core earnings per share of $1.78 beat the FactSet consensus of $1.72.
Revenue slipped 0.5% to $27.85 billion, while the FactSet consensus called for an increase of 1.4% to $28.40 billion.
That was the first time revenue didn’t beat expectations in at least five years, based on available FactSet data going back to February 2019, when results for the fourth quarter of 2018 were reported.
“Category growth rates are normalizing as consumer behaviors largely revert to pre-pandemic norms and net revenue realization moderates as inflationary pressures are expected to abate,” said Chief Executive Ramon Laguarta.
Among the company’s business segments, PepsiCo Beverages North America revenue fell 2.4% to $7.91 billion, Frito-Lay North America revenue declined 3% to $7.47 billion and Quaker Foods North America revenue sank 15.7% to $893 million.
The only geographic region that reported growth was Latin America, where revenue rose 17.6% to $3.97 billion.
Separately, the company said it raised its annual dividend to $5.42 a share from $5.06 a share, effective in June.
Based on Thursday’s stock closing price of $173.85, the new dividend rate implies a dividend yield of 3.12%, which is above the yield for the Consumer Staples Select Sector SPDR ETF
XLP,
of 2.56% and more than double the implied yield for the S&P 500 index
SPX,
of 1.43%.
“We are pleased with our results for 2023 as we successfully navigated another year of elevated levels of inflation, macroeconomic volatility, geopolitical tensions and international conflicts,” Laguarta said.
“We are confident that our businesses will perform well in 2024 in the context of changing marketplace conditions,” he added.
PepsiCo expects 2024 core EPS of “at least” $8.15, compared with the FactSet consensus of $8.15.
The stock has gained 4.6% over the past three months through Thursday, while the SPDR consumer staples ETF has rallied 7.8% and the S&P 500 has climbed 15%.
