PepsiCo likely to report weak Q2 results as North America demand slumps

After entering fiscal 2025 on a low note, PepsiCo, Inc. (NASDAQ: PEP) is gearing up to publish its second-quarter results. The company is facing sales pressure amid geopolitical tensions and newly imposed import tariffs, and has warned that elevated supply chain costs could impact margins this year. It has raised prices across the product line, resulting in a decline in volumes.

The soft drink giant’s second-quarter report is slated for release on Thursday, July 17, at 5:00 am ET. It is estimated that sales declined slightly to $22.3 billion in Q2 from $22.5 billion in the comparable quarter of 2024. The consensus earnings estimate is $2.03 per share, which represents an 11% decline year-over-year.

Stock Slips

PepsiCo’s stock has been a on s sustained decline for over a year, and the downtrend intensified in recent months. It has lost around 9% in the past six months. PEP has remained one of the worst-performing Wall Street stocks this year, underperforming the S&P 500 index which posted gains during the period. While the low valuation presents a buying opportunity, concerns persist about the company’s weak near-term outlook amid challenges such as soft customer demand and margin pressure.

In the first three months of FY25, PepsiCo’s revenue decreased 1.8% annually to $17.9 billion, with organic revenue edging up 1.2%. Core earnings, adjusted for special items, declined 8% year-over-year to $1.48 per share. Unadjusted net income attributable to the company was $1.8 billion or $1.33 per share, compared to $2 billion or $1.48 per share a year earlier.

Cautious Guidance

Revenue beat estimates while earnings fell short of expectations, marking the first quarterly miss in more than two decades. The management said it expects a low-single-digit increase in full-year organic revenue and a decline in core earnings per share. The weak forecast reflects potential impacts from the trade war and cautious consumer spending.

From PepsiCo’s Q1 2025 earnings call:

“There are markets that we’re seeing a bit of a slowdown in the consumer, namely China. China is a market where we’ve seen the consumer hurting a little bit. We’re seeing Mexico, in a way, impacted by what happens in the US. And I think those two markets will continue to be connected in consumer sentiment and probably consumer disposable income as well. We’re seeing Europe navigating quite well. The first signs that we have in Europe are positive. We’re seeing India in a good place. We’re seeing Brazil in a good place.”

Losing Fizz

PepsiCo’s snack segment has been experiencing a slowdown in demand, particularly in North America. The leadership has launched measures to boost sales, such as promotional offers, improving the product-price mix and expanding multicultural product offerings. Other turnaround measures include cutting costs and improving productivity. Meanwhile, the company is expanding its reach into the health and wellness market — earlier this year, it acquired prebiotic soda brand Poppi for about $2 billion.

Over the past four months, shares of PepsiCo have traded below their 52-week average value. The stock lost further momentum this week and traded lower on Wednesday afternoon.