Shares of PepsiCo (NASDAQ:PEP) fell in pre-market trading after the company reported earnings for its second quarter of FY24 and its revenues fell short of estimates. The snack and beverage giant posted Q2 revenues of $22.5 billion, up by 0.8% year-over-year but falling short of consensus estimates of $22.6 billion.
The company’s adjusted earnings came in at $2.28 per share, beating analysts’ consensus estimate of $2.16 per share.
PEP’s Revenue Breakdown
PepsiCo’s organic revenue rose 1.9% in the quarter, driven by its international business. However, domestic sales were hit due to product recalls and declining demand. The company’s management noted that value-conscious consumers, reacting to years of price increases, are buying fewer chips or opting for cheaper private-label alternatives.
Indeed, the share of PepsiCo’s North American business as a part of its total Q2 revenues of $22.5 billion has reduced to less than 59% from 59.7% in the same period last year.
PEP’s FY24 Outlook
Looking forward, management narrowed its FY24 revenue outlook and now expects its organic revenues to rise by 4% year-over-year compared to its previous forecast of at least 4% growth. PEP anticipates that core earnings per share will increase by 8% on a constant currency basis, implying core earnings of $8.15 per share, a 7% rise year-over-year.
Is PEP a Buy, Sell, or Hold?
Analysts remain cautiously optimistic about PEP stock, with a Moderate Buy consensus rating based on 10 Buys and six Holds. Over the past year, PEP has declined by more than 8%, and the average PEP price target of $187.40 implies an upside potential of 14.5% from current levels. However, these analyst ratings are likely to change following PEP’s Q1 results today.
