PepsiCo (PEP) Q3 2024 earnings summary

Executive summary

• Net revenue for Q3 2024 was $23.3B, down 1% year-over-year, with operating profit at $3.87B, down 4%; net income attributable to PepsiCo was $2.93B, down 5%.

• Year-to-date net revenue rose 1% to $64.1B, with operating profit up 3% to $10.6B and net income up 4% to $8.06B.

• Results were impacted by higher operating costs, restructuring charges, and a significant product recall in Quaker Foods North America.

• Productivity and cost transformation programs, including automation and digitalization, are being deployed to drive efficiency and support investment.

• Effective net pricing and productivity savings partially offset cost pressures and volume declines.

Financial highlights

• Q3 gross margin was 55.4% (up from 54.5%); operating margin declined to 16.6% from 17.1%.

• Q3 diluted EPS was $2.13, down from $2.24; core EPS was $2.31, up 5% in constant currency.

• Free cash flow for the 36 weeks was $3.5B, down from $5.2B, mainly due to unfavorable working capital.

• Cash and cash equivalents at period end were $7.3B, down from $10.1B at the end of the prior year.

• Year-to-date operating cash flow was $6.22B (down from $7.63B prior year); capital expenditures were $2.85B.

Outlook and guidance

• 2024 organic revenue growth outlook was revised to a low-single-digit increase (prior: ~4%) due to slower U.S. recovery and geopolitical impacts.

• At least 8% core constant currency EPS growth is expected for 2024, with core EPS of at least $8.15.

• Management expects to return approximately $8.2B to shareholders in 2024, including $7.2B in dividends and $1.0B in share repurchases.

• A 7% increase in the annualized dividend to $5.42 per share was announced, effective June 2024.

• Continued cost pressures, especially in transportation and labor, and ongoing FX headwinds are anticipated.