PepsiCo, Inc. (NASDAQ: PEP) is navigating a challenging market environment, with weak consumer spending and tariff-driven cost escalation weighing on sales volumes. The company is advancing a revival strategy, with a focus on integrating its North America beverages and snacks businesses to improve efficiency and reduce costs. Investors will be keeping a close watch on the upcoming earnings report, looking for updates on the evolving business model.
Estimates
The soft drink giant is preparing to report its third-quarter results on Thursday, October 9, at 6:00 am ET. Market watchers forecast core earnings of $2.26 per share for the September quarter, compared to $2.31 per share in the prior-year quarter. The consensus estimate is for an increase in third-quarter revenue to $23.87 billion from $23.32 billion in Q3 2024.
The company’s stock fell sharply after a weak start to the year, marked by a rare earnings miss in the first quarter. The downturn continued in the following weeks, driving the stock to its lowest level in nearly four years. The shares are down roughly 8% year-to-date, reflecting a volatile stretch of earnings pressure and shifting consumer trends. From a long-term perspective, the valuation looks compelling, given the relatively high dividend yield and the underlying strength of PepsiCo’s diversified portfolio.
Q2 Outcome
For the second quarter of FY25, the company reported revenues of $22.7 billion, which is slightly higher than the revenue it generated in the year-ago quarter. Organic revenue growth was 2.1%. Core earnings, adjusted for special items, declined 5% YoY to $2.12 per share in the June quarter. On a reported basis, Q2 net income was $1.26 billion or $0.92 per share. Both revenue and profit surpassed Wall Street’s projections.
From PepsiCo’s Q2 2025 Earnings Call:
“In terms of specific markets, I would say, we’re very pleased with LatAm. We’re very pleased with some parts of Europe where we see strength. We’re pleased with some parts of the Middle East. China, a little bit weaker. As you think about the Chinese consumer, post the Chinese New Year, a little bit softer. India continues to be a double-digit growth. So, overall, I would say our business, strong competitiveness. We continue to invest in category growth, which, at the end, is the long-term driver of business. And the important thing for us is this was a business that had – the profitability was below the PepsiCo average in the past.”
Outlook
In the Q2 report published in mid-July, the management said it continues to expect a low-single-digit increase in organic revenue and a 1.5% decline in core earnings per share for fiscal 2025. It is investing in new technology, including AI, and innovation that is expected to revive demand in the North American market. The strategy is focused on boosting operating efficiency and reducing costs. The company targets to deliver around 70% more productivity in the second half compared to the first half, mainly leveraging the cost-cutting drive.
PepsiCo shares traded lower on Monday morning, continuing the weakness they experienced since the beginning of the month. The stock opened below its 52-week average of $147.69, underperforming the broader S&P 500 index.
