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PepsiCo CFO on Q3 results: ‘enhanced revenue growth in CPG is not temporary’

By:
on Oct 5, 2021
Listen to this article
  • PepsiCo reports market-beating results for the fiscal third quarter.
  • CFO Hugh Johnston discusses earnings on CNBC's "Squawk Box".
  • Shares of the beverage giant jumped 0.5% on Tuesday morning.

PepsiCo Inc (NASDAQ: PEP) said on Tuesday its profit and revenue in the fiscal third-quarter beat Wall Street estimates. Shares of the company are up 0.5% in premarket trading on raised guidance for the full year despite a quarterly decline in gross margins.

Q3 financial performance

PepsiCo reported $2.22 billion in net income that translates to $1.60 per share. In the comparable quarter of last year, its net income stood at a higher $2.29 billion or $1.65 per share. Adjusted for one-time items, the beverage giant earned $1.79.

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The American multinational generated $20.19 billion in revenue that represents an annualised growth of 11.6%. According to FactSet, experts had forecast $1.73 of adjusted EPS on $19.39 billion in revenue, as per the earnings press release.

Other notable figures

Other notable figures in PepsiCo’s earnings report include a 15.2% increase in the cost of sales and a decline in gross margin from 54.9% to 53.5%. The Nasdaq-listed company saw a year-over-year increase of 6% in Q3 revenue from Frito Lay, 2% from Quaker Foods, and 7% from Beverages in North America.

Guidance for the full year

For the full financial year, PepsiCo now forecasts an 8% increase in organic revenue and “at least” 12% growth in core EPS.

The report comes only days after Morgan Stanley raised its price target on PepsiCo to $172 that represents an about 15% upside from here.

Highlights from CFO’s interview on CNBC’s “Squawk Box”

Commenting on the financial update, PepsiCo CFO Hugh Johnston said on CNBC’s “Squawk Box”:

Lots of people have been wondering if the enhanced revenue growth in the CPG space is temporary. In our case, we can confidently say it’s not temporary, on strong market share gains and strong innovation that’s driving terrific demand for our products.

Johnston agreed that PepsiCo was facing supply chain constraints but said both the snack and beverage businesses were still “almost” back to the levels seen before the pandemic in 2019.

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