On Oct 8, PepsiCo ( PEP, Financial) reported its Q3 quarterly results for this year, showing a slower-than-anticipated recovery of the U.S. consumer. The snack and beverage giant scaled back its full-year outlook for organic sales growth to a "low-single-digit" increase, down from the previously projected 4%. "The recovery of the consumer in the U.S., frankly, has been slower than we had anticipated," CFO Jamie Caulfield stated during a conference call with analysts. This sentiment echoes CEO Ramon Laguarta's remarks from July when he noted the company was contending with "a consumer that is more challenged."
PepsiCo's report arrives as one of the first major consumer-oriented earnings releases this season, setting the tone for upcoming disclosures from companies like Domino's Pizza (DPZ, Financial) and Walgreens Boots Alliance (WBA, Financial). These upcoming earnings, along with insights from large financial institutions, are expected to show the overall health of the consumer market amid recent strong job and wage data.
Adding to the concerns, PepsiCo confirmed an expansion of value resets in its Doritos and Tostitos lines, signaling potential margin pressures within its Frito-Lay North America segment. The slowdown in international organic sales growth, the lowest since the first quarter of 2021, may also point to broader challenges for multinationals in the upcoming earnings season.
Wells Fargo analysts weighed in by reiterating an "equal weight" rating on PepsiCo stock by setting a price target of $ 70. The firm highlighted potential challenges facing the company through 2025, questioning the feasibility of achieving an 8% earnings-per-share growth if current trends persist.
As analysts are watching the whole scenario closely, PepsiCo's cautionary outlook reflects the sluggishness of the economy. However, the coming weeks will be critical for investors seeking clarity on whether this trend is isolated or indicative of a wider economic slowdown.
