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PepsiCo: Q2 2022 Earnings Update

Industry: Soft Drinks
Current: Company Performance

PepsiCo reported organic revenue growth of 13% in Q2 2022 on an annual basis
PepsiCo reported GAAP earnings per share (EPS) of $1.03
Profitability margins were impacted due to increasing inflationary pressures

On July 12, 2022, PepsiCo reported Q2 revenue of $20.2 billion (an increase of 5% year-over-year, organic growth of 13%) on Non-GAAP earnings per share (EPS) of $1.86.

Summary: PepsiCo’s Q2 2022 revenue grew 5% as compared to the same period in 2021. PepsiCo reports its revenues across seven segments: Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), PepsiCo Beverages North America (PBNA), Latin America (LatAm), Europe, Africa, Middle East & South Asia (AMESA), and Asia-Pacific, Australia and New Zealand and China Region (APAC).

FLNA business grew by 13.8% vs 2021 (organic +14%) owing to effective net pricing of their products
QFNA business grew by 17.4% vs 2021 (organic +18%) due to an increase in organic volume and effective net pricing of their products
PBNA business declined by 0.6% vs 2021 (organic +9%) due to a 9-percentage-point unfavorable impact of the Juice Transaction and a slight organic volume decrease, largely offset by effective net pricing.
LatAm business grew by 22.8% vs 2021 (organic +22%) due to growth in organic volume and effective net pricing of their products
Europe business declined by 8% vs 2021 (organic +9%) due to a 12-percentage-point impact of unfavorable foreign exchange, organic volume decline, and a 5-percentage-point unfavorable impact of the Juice Transaction, partially offset by effective net pricing
AMESA business grew by 5.9% vs 2021 (organic +23%) due to organic volume growth and effective net pricing
APAC business grew by 3.3% vs 2021 (organic +13%) due to organic volume growth and effective net pricing

Down the P&L, the company reported GAAP gross margins of 53.4% during Q2 2022, a year-over-year decrease of 34 bps due to increasing inflationary pressures. GAAP operating margins declined 601 bps year-over-year to 10.3%, the decline primarily reflects the impact of the charges associated with the Russia-Ukraine conflict and the brand portfolio impairment charges. On the bottom line, the company reported a per-share basis profit of $1.03 (GAAP), whereas the Non-GAAP EPS came to $1.86 per share.

Guidance: PepsiCo now expects to deliver 10% organic revenue growth (as opposed to the previous guidance of 8%) for FY2022. In line with its previous guidance for 2022, PepsiCo continues to expect:

An 8% increase in core constant currency EPS
Core annual effective tax rate: 20%
Total cash returns to shareholders of approximately $7.7 billion, comprised of dividends of $6.2 billion and share repurchases of $1.5 billion

Pepsi also continues to expect a 2-percentage-point foreign exchange translation headwind to impact reported net revenue and core EPS growth based on current market consensus rates.

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