PepsiCo, Inc. (NASDAQ:PEP) reported second-quarter results Thursday that topped revenue expectations but fell just short on adjusted earnings, sending the stock lower in premarket trading.
While revenue exceeded Wall Street estimates, investors appeared disappointed by a slight adjusted EPS miss, weaker-than-expected North American organic sales and the company’s decision to maintain, rather than raise, its full-year guidance.
Sentiment may also have been pressured by recent price forecast cuts from JPMorgan, Barclays, BNP Paribas and UBS.
PepsiCo Q2 Revenue And Profit Growth
Net revenue rose 6.4% year over year to $24.18 billion, beating the $23.96 billion analyst estimate. Core EPS increased 4% to $2.20, missing the $2.21 estimate, while GAAP EPS rose 137% to $2.18.
Revenue growth reflected 2.4% organic growth and a 2.2-percentage-point benefit from foreign exchange.
Acquisitions and divestitures added a net 1.8 percentage points to revenue growth. Global organic volume increased 3% for convenient foods and 2% for beverages.
Operating profit increased 125% to $4.02 billion, and operating margin expanded by 875 basis points to 16.6%. The GAAP profit increase reflected prior-year impairment charges tied to the Rockstar and Be & Cheery brands.
Lower restructuring charges and acquisition and divestiture impacts also supported the increase.
Core operating profit rose 4% to $4.07 billion, while core operating margin decreased by 40 basis points to 16.8%.
North America Softness
PepsiCo Foods North America’s net revenue declined 2%, mainly due to lower effective net pricing. However, the business gained volume and market share through innovation and affordability initiatives.
PepsiCo Beverages North America’s net revenue increased 7%, supported by acquisitions and 1% organic revenue growth. Organic volume declined by 4%, including a 0.5 percentage-point decrease related to the case-pack water business and a transition to a third-party partner.
North America’s organic revenue declined 0.5%, falling short of expectations as U.S. food and beverage performance slowed. The company attributed this to tighter consumer budgets amid rising inflation.
PepsiCo attributed weaker North American performance in part to tightening consumer budgets. The company said U.S. food and beverage demand moderated during the quarter as rising inflationary pressures weighed on shoppers, prompting expectations for a more gradual recovery in the region through the rest of 2026.
International Business Momentum
International organic revenue grew 7%, marking the 21st consecutive quarter of at least mid-single-digit growth.
International Beverages Franchise revenue rose 11%, EMEA increased 10%, Latin America Foods grew 15%, and Asia Pacific Foods rose 12%.
Year to date, net revenue increased 7.3% to $43.62 billion. GAAP EPS rose 72% to $3.88, and core EPS increased 6% to $3.81. Operating cash flow reached $2.37 billion, up from $996 million a year ago.
Cash and cash equivalents were $10.25 billion, with short-term debt at $10.60 billion and long-term debt at $42.61 billion.
PepsiCo Guidance And Cost Outlook
PepsiCo anticipates higher input cost inflation in the second half of 2026.
The company expects record productivity savings and tariff refund claims from last year to help offset increased costs and planned investments.
PepsiCo reaffirmed its fiscal 2026 guidance, projecting organic revenue growth of 2% to 4% and core constant currency EPS growth of 4% to 6%.
The company also maintained adjusted EPS guidance of $8.55 to $8.71, compared to the $8.64 estimate, and sales guidance of $97.68 billion to $99.56 billion, versus the $98.88 billion estimate.
The company expects fiscal 2026 net revenue growth of 4% to 6% and core EPS growth of approximately 5% to 7%.
Core and core constant currency EPS growth will be concentrated in the fourth quarter, while North American performance is expected to improve gradually throughout the year.
PEP Stock Price Activity: PepsiCo shares were down 2.44% at $139.03 in the premarket session on Thursday, according to Benzinga Pro data.
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