Shares of PepsiCo (PEP) dipped in pre-market trading after the snack and beverage giant reported disappointing sales in the Fiscal third quarter and lowered its guidance. The company posted third-quarter net revenues of $23.3 billion, a dip of 0.6% year-over-year. This fell short of Street estimates of $23.86 billion. However, the company’s organic revenues grew by 1.3% year-over-year.
Additionally, PEP reported core earnings of $2.31 per share in the third quarter, ahead of consensus estimates of $2.29 per share.
Why Did PEP’s Revenues Dip in Q3?
The company’s management explained that the company faced several challenges in Q3, particularly from subdued trends in North America. These challenges were compounded by the adverse impact of product recalls in the Quaker Foods business earlier this year, which continued to weigh on its revenues in the third quarter. Additionally, rising geopolitical tensions in certain international markets caused further business disruptions to its revenues.
In fact, the company’s Quaker Foods North America segment was hit especially hard as its revenues fell by 13% during the quarter to $648 million, following an even steeper 18% decline in the previous quarter.
PEP Lowers FY24 Outlook
Looking ahead, PepsiCo expects its organic revenues to rise in the low single-digit in FY24, compared to its prior estimate of a growth of 4%. Furthermore, the company has forecast its core earnings to increase by 7% year-over-year to $8.15 per share, slightly above analysts’ expectations of $8.14 per share.
PepsiCo’s Chairman and CEO Ramon Laguarta commented, “We continue to expect to deliver at least 8 percent core constant currency EPS growth as we will focus on tightly managing our costs to better align with the subdued growth environment that we are currently operating in.”
What Is the Target Price for PEP?
Analysts remain cautiously optimistic about PEP stock, with a Moderate Buy consensus rating based on seven Buys and nine Holds. Over the past year, PEP has increased by more than 6%, and the average PEP price target of $184.81 implies an upside potential of 10.5% from current levels. These analyst ratings are likely to change following PEP’s results today.
