PepsiCo shares rise as Q2 revenue beats expectations despite weak US demand, soft volumes

Shares of PepsiCo Inc. climbed in premarket trading on Thursday after the snack and beverage giant reported a better-than-expected rise in second-quarter revenue, even as product volumes continued to decline and consumer sentiment remained cautious.

The shares were rising by more than 2% during pre-market on Thursday.

The company also reaffirmed its full-year guidance, offering a measure of stability amid shifting health trends and economic uncertainty.

PepsiCo’s revenue for the quarter rose 1% year-over-year to $22.73 billion, narrowly beating Wall Street expectations, which had forecast a decline to $22.27 billion, according to FactSet.

While net income attributable to the company dropped to $1.26 billion, or 92 cents per share, from $3.08 billion, or $2.23 per share a year earlier, the company’s core earnings—excluding one-time charges—stood at $2.12 per share.

This was ahead of the $2.03 consensus estimate from analysts.

The growth in revenue came even as organic volume, which excludes the impact of acquisitions, shrank by 1.5%.

However, this marked an improvement from the 2% decline recorded in the previous quarter. Pricing gains of 3% helped offset the volume softness.

North America demand remains fragile

PepsiCo continues to face weaker demand in its key North American markets.

In North America, volumes fell 1% across Pepsi's food business and 2% across its beverage unit.

Volume growth in Latin America foods and Asia Pacific foods were offset by lower food volumes across Europe, the Middle East and Africa.

Food volumes fell 1.5% globally, while beverage volumes were flat.

Consumers have been increasingly turning to more affordable or healthier alternatives, weighing on sales of both snacks and sodas.

The company’s snacks division, home to brands like Lay’s and Doritos, has felt the brunt of shifting dietary habits and economic caution, with many consumers pulling back on discretionary purchases.

In the first quarter, Pepsi’s North America food segment saw organic sales decline 2%, while beverage volumes fell 3%, despite a 1% rise in sales largely driven by price hikes.

"Our core USD EPS outlook has improved versus our previous expectations as foreign exchange headwinds have moderated, due to the weakening of the US dollar," CEO Ramon Laguarta said in a statement, adding that North America business improved in key categories and channels.

Healthier products and energy drinks provide lift

PepsiCo, like rival Coca-Cola, is adapting to changing consumer preferences by investing in products seen as healthier or functional.

Its recently acquired prebiotic soda brand Poppi and new flavors under existing snack lines aim to attract younger and more health-conscious buyers.

The company said a rebound in demand for energy drinks and "better-for-you" sodas helped mitigate some of the volume pressure.

Outlook unchanged for full year

PepsiCo kept its full-year guidance intact, forecasting that its core constant currency earnings per share would remain roughly unchanged from last year.

It also expects organic revenue to grow by a low-single-digit percentage.

While higher prices have helped protect margins, PepsiCo is now balancing premium offerings with more affordable products to cater to a price-sensitive market.

The company’s results suggest that while headwinds remain, its diversified portfolio and pricing strategy may help it navigate the evolving consumer landscape.