PepsiCo Q4 Earnings Beat, Shares Dip 2% on Y/Y Revenue Decline

PepsiCo, Inc. PEP has reported robust fourth-quarter 2024 results, wherein earnings surpassed the Zacks Consensus Estimate and improved year over year. Meanwhile, the company’s top line beat the consensus mark but declined year over year. The top-line results have been mainly affected by subdued category demand in its convenient food business and the impacts of a product recall in the QFNA segment.PepsiCo’s fourth-quarter core EPS of $1.96 beat the Zacks Consensus Estimate of $1.95 and increased 10.1% year over year. In constant currency, core earnings improved 14% from the year-ago period. The company’s bottom line benefited from effective cost controls, driven by incremental investments to improve market competitiveness. Its reported EPS of $1.11 improved 17% year over year in the quarter. Foreign currency impacted EPS by 4%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The company continued to benefit from gains in its international business, which delivered significant year-over-year organic revenue growth of 6%. The international business also reported an expansion of 260 basis points (bps) in the core operating profit margin.Shares of PepsiCo declined 2.1% in the pre-market session today, led by continued softness in the top line. Shares of the Zacks Rank #4 (Sell) company have lost 10.2% in the past three months compared with the industry’s 5.8% decline. Image Source: Zacks Investment Research Peek Into PEP’s Q4 DetailsNet revenues of $27.8 million dipped 0.2% year over year but beat the Zacks Consensus Estimate of $27.9 billion. Revenues continued to be affected by weak category trends in the North America convenient food business, ongoing recall-related issues at QFNA and business disruptions caused by escalating geopolitical tensions in some international markets.The unit volume was down 1% each for the convenient food business and the beverage business. Foreign currency impacted revenues by 2%.On an organic basis, revenues grew 2.1% year over year. The variance mainly resulted from a soft QFNA performance, which was impacted by certain product recalls and subdued category demand. The company’s consolidated organic volume was down 1%, while effective net pricing improved 3% in the fourth quarter.Our model predicted year-over-year organic revenue growth of 2.3% for the fourth quarter, with a 3.2% gain from price/mix and a 0.9% decline in volume.PepsiCo, Inc. Price, Consensus and EPS Surprise  PepsiCo, Inc. price-consensus-eps-surprise-chart | PepsiCo, Inc. QuoteOn a consolidated basis, the reported gross profit declined 1% year over year to $14.6 billion. The core gross profit rose 0.2% year over year to $14.9 million. The reported gross margin declined 41 bps, whereas the core gross margin expanded by 23 bps.We anticipated the core gross margin to expand 130 bps year over year to 54.8% in the fourth quarter. In dollar terms, core gross profit was expected to increase 3.9% year over year.The company reported an operating income of $2.3 billion, which rose 33.7% year over year. The core operating income grew 8.7% year over year to $3.2 billion. The core constant-currency operating income improved 8% year over year. The reported operating margin expanded 206 bps from the year-ago quarter.Meanwhile, the core operating margin expanded 102 bps, driven by its robust International businesses and a strong pipeline of productivity initiatives, reflecting an increase in advertising and marketing spend as a percentage of sales.Our model predicted core SG&A expenses of $11.9 billion, which indicated year-over-year growth of 1.9%. As a percentage of sales, core SG&A expenses were anticipated to be 42.3%, suggesting a 20-bps rise from the prior-year quarter.We expected a core operating margin of 12.5%, implying a 110-bps increase from the year-ago quarter’s actual.PEP’s Segmental DetailsPepsiCo witnessed revenue growth on a reported basis across most of the operating segments, except for FLNA, QFNA and Latin America.Revenues on a reported basis improved 6% year over year in Europe, 5% at AMESA, and 2% at the APAC segments, while revenues were flat in PBNA. However, reported revenues declined 2% each at FLNA and the QFNA segments, and 7% in Latin America.PEP’s organic revenues improved across most of the operating segments, except for FLNA and QFNA. Organic revenues rose 4% for Latin America, 7% for Europe, 14% for AMESA and 1% for the APAC segment. However, organic revenues declined 2% each for the FLNA and QFNA segments, and were flat at PBNA.Financials of PepsiCo Show StabilityPEP ended 2024 with cash and cash equivalents of $8.5 billion, long-term debt of $37.2 billion, and shareholders’ equity (excluding non-controlling interest) of $18 billion.Net cash provided in operating activities was $12.5 billion as of Dec. 28, 2024, compared with $13.4 billion as of Dec. 30, 2023.PEP’s Outlook for 2025Going into 2025, PepsiCo expects to continue progressing on the expansion of its international business and executing plans to improve the performance of its North America segment. Additionally, the company’s multi-year productivity initiatives are poised to help fund disciplined commercial investments and aid profitability.Consequently, the company expects year-over-year organic revenue growth in the low-single digits for 2025. It forecasts core constant-currency EPS growth in the mid-single-digits year over year.Based on the current rates, PEP expects currency headwinds to hurt revenues and the core EPS by 3 percentage points in 2025. The company expects a core effective tax rate of 20% for 2025.Given the above assumption, PepsiCo expects core EPS growth in the low-single digits for 2025, whereas it reported a core EPS of $8.16 in 2024.PepsiCo has been committed to rewarding shareholders through dividends and share buybacks. It expects to return a value worth $8.6 billion in 2025, including $7.6 billion of dividends. Additionally, the company plans to repurchase shares worth $1 billion in 2025.Concurrent with the earnings release, the company announced a 5% increase in the annualized dividend to $5.69 per share from $5.42. The raised dividend is expected to be paid out in June 2025.Don’t Miss These Better-Ranked StocksWe have highlighted three better-ranked stocks from the Consumer Staple sector, namely United Natural Foods UNFI, Vita Coco Company COCO and US Foods USFD.United Natural currently sports a Zacks Rank #1 (Strong Buy). UNFI shares have rallied 42.9% in the past three months. The company has a trailing four-quarter earnings surprise of 553%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.The Zacks Consensus Estimate for United Natural’s current financial-year sales and earnings suggests growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figures.Vita Coco currently has a Zacks Rank #2 (Buy). COCO shares have risen 5.6% in the past three months. The company has a trailing four-quarter earnings surprise of 17.6%, on average.The Zacks Consensus Estimate for Vita Coco’s current financial-year sales and EPS suggests growth of 3.7%  and 29.7%, respectively, from the year-ago period’s reported figures.US Foods currently carries a Zacks Rank #2. USFD shares have risen 13.6% in the past three months. USFD has a trailing four-quarter negative earnings surprise of 0.4%, on average.The Zacks Consensus Estimate US Foods’ current financial-year sales and earnings suggest growth of 6.4% and 18.6%, respectively, from the year-ago period's reported figures.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Vita Coco Company, Inc. (COCO): Free Stock Analysis Report PepsiCo, Inc. (PEP): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report US Foods Holding Corp. 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