PepsiCo sales soar in Q2

PepsiCo Inc. this week posted a stellar second quarter as earnings increased on soaring revenues. Several units enjoyed organic growth, including PepsiCo’s global beverage business.

The food and beverage giant reported revenues of $19.2 billion, up 20.5% over $15.9 billion in the second quarter of 2020, and an increase of 14.1% year to date. Earnings jumped to $1.70 per share, up 44% from $1.18 in the same quarter a year ago.

“Moving forward, we remain focused on winning in the marketplace and building competitive advantages that will position us well as consumer habits and preferences evolve over time,” PepsiCo Chairman and CEO Ramon Laguarta said in a statement.

Wall Street viewed favorably PepsiCo’s second quarter.

PepsiCo’s results surpassed “relatively high expectations,” Deutsche Bank wrote in a research note, citing organic growth and other metrics that beat estimates. Deutsche Bank analysts raised their FY21 forecast for PepsiCo’s organic growth to 6.3% from 4.8% and earnings per share (EPS) to $6.22 from $6.08.

In an equity research note, Cowen also raised its FY21 EPS estimate to $6.20 from $6.07. Cowen described PepsiCo’s “strength” in the quarter as “broad-based,” with the company meaningfully expanding margins and PepsiCo North America Beverages reporting double-digit revenue growth.

“At a high level, today’s results further reinforce our confidence in PEP’s [PepsiCo’s] advantaged operating position,” Goldman Sachs wrote in July 13 equity research. PepsiCo’s “fundamentals in the coming quarters are likely to only further reflect their reinvestment in growth that PEP has prudently undertaken across its business over the last few years.”

PepsiCo achieved organic growth in several units, including its global snacks business (6% growth) and global beverage business (21%).

“Our performance highlights the continued strength in both developed and developing and emerging markets, which delivered 12% and 16% organic revenue growth, respectively,” PepsiCo executives said in prepared management remarks.

Frito-Lay North America achieved 6% organic revenue growth and enjoyed increases in both volume and price/mix. PepsiCo attributed the results to gains in the salty snack category and growth across its key trademark brands, such as Lays, Doritos, Cheetos and Ruffles. Smaller brands such as PopCorners, Sun Chips and Miss Vickie’s also enjoyed very strong gains, PepsiCo shared.

PepsiCo Beverages North America was another bright spot in the quarter. Organic revenue increased 21%, with gains achieved in the liquid refreshment beverage category, including the carbonated soft drink (CSD), ready-to drink (RTD) tea and juice categories.

The second quarter wasn’t entirely a home run. While Quaker Foods North America gained market share in the at-home breakfast, snacks and meals categories, organic revenue declined in the quarter. Most people a year ago were stuck at home eating breakfast and other meals.

By and large, a return to a semblance of normalcy has been good for PepsiCo. “Obviously, the beverage category is benefiting from the change of patterns and behaviors of consumers, and it was very negatively affected in the away-from-home consumption last year,” Laguarta said in an earnings call with analysts. “Obviously, we're benefiting now from that, and you see that in the acceleration of … our North America business.”

Laguarta added PepsiCo’s global “beverage business is growing much faster in the away-from-home business”— thanks in part to open stores and people leaving their residences.