PepsiCo (PEP) Q2 2024 earnings summary

Executive summary

• 2024 organic sales growth guidance was revised from around 5% to approximately 4% due to a softer U.S. consumer environment and Quaker Foods recall impacts.

• Net revenue for Q2 2024 was $22.5B, up 0.8% year-over-year; operating profit rose 11% to $4.05B, with margin up 1.6 points to 18.0%.

• Net income attributable to PepsiCo increased 12% to $3.08B; diluted EPS grew 13% to $2.23, with core EPS at $2.28.

• Growth was driven by effective net pricing, productivity savings, and international strength, partially offset by higher costs and lower organic volume.

• Significant charges related to a Quaker product recall and ongoing productivity plan impacted results.

Financial highlights

• Year-to-date net revenue was $40.8B, up 1.5%; operating profit rose 8% to $6.8B.

• Q2 2024 gross margin expanded by 126 bps; operating margin expanded by 160 bps year-over-year to 18.0%.

• Free cash flow for the first 24 weeks was $(259)M, down from $628M prior year, due to unfavorable working capital.

• Cash dividends paid in the first 24 weeks totaled $3.5B; share repurchases were $461M.

• Net income attributable to PepsiCo for 24 weeks was $5.13B, up 10%; diluted EPS was $3.71, up 10%.

Outlook and guidance

• 2024 organic revenue growth is now expected at approximately 4% (previously at least 4%).

• At least 8% increase in core constant currency EPS for 2024; core EPS guidance of at least $8.15.

• Total cash returns to shareholders projected at $8.2B, including $7.2B in dividends and $1.0B in share repurchases.

• Management anticipates continued higher operating costs, especially in transportation and labor, for the remainder of 2024.

• Foreign exchange expected to be a 1 percentage point headwind to reported net revenue and core EPS growth.