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PepsiCo (PEP) Beats on Q2 Earnings and Revenues, Raises View

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PepsiCo, Inc. PEP has reported blockbuster second-quarter 2021 results, wherein earnings and revenues beat the Zacks Consensus Estimate and improved significantly year over year. The company's results reflected favorable year-over-year comparisons as it lapped the pandemic-led closures of the prior-year quarter.

It witnessed strong revenue growth across developed and developing as well as emerging economies as the impacts related to closures subsided. The company also gained from the resilience and strength in its global snacks and foods business as well as growth in the beverage category.

PepsiCo continues to benefit from investments in brands, go-to-market systems, supply chain, manufacturing capacity and digital capabilities to build competitive advantages.

Driven by the strong results, the company’s shares improved 1.5% in the pre-market session. Shares of the Zacks Rank #3 (Hold) company grew 5.2% in the past three months compared with the industry’s 3% growth.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Quarter in Detail

PepsiCo’s second-quarter core earnings per share (EPS) of $1.72 beat the Zacks Consensus Estimate of $1.52 and increased 30.3% year over year. In constant currency, core earnings were up 27% from the year-ago period. The company’s reported EPS of $1.70 improved 44.1% year over year. Foreign currency impacted earnings per share by 4% in the reported quarter.

Net revenues of $19,217 million improved 20.5% year over year and surpassed the Zacks Consensus Estimate of $18,022 million. On an organic basis, revenues grew 12.8% year over year. Foreign currency impacted revenues by 3% in the second quarter. Revenues benefited from volume growth and robust pricing in the reported quarter.

Consolidated organic volume was up 7% and net pricing improved 5% in the second quarter. Pricing gains were driven by strong realized prices across all segments. Unit volume was flat year over year for the snacks/food business and up 20% for the beverage business.

PepsiCo, Inc. Price, Consensus and EPS Surprise

PepsiCo, Inc. Price, Consensus and EPS Surprise
PepsiCo, Inc. Price, Consensus and EPS Surprise

PepsiCo, Inc. price-consensus-eps-surprise-chart | PepsiCo, Inc. Quote

Revenues were also aided by resilience in the snacks business as well as gains in the beverage business. Organic revenues grew 6% for the snacks business and 21% for the beverage business. The gains reflected the lapping of a tough period in the prior-year quarter due to the pandemic.

On a consolidated basis, gross margin, on a reported basis, contracted 175 basis points (bps), while core gross margin declined 178 bps. The gross margin decline can be attributed to the mix impacts from the international acquisitions, which reflect the additional month of results from Pioneer Foods, and Be and Cheery to make adjustments in sync with PepsiCo’s international reporting calendar.

Reported operating margin rose 174 bps, while core operating margin improved 71 bps. Core operating margin growth was driven by strong growth in the PepsiCo Beverages North America (“PBNA”) segment, which delivered 84% core operating profit growth and more than 400 bps of core operating margin expansion.

Segment Details

On a segmental basis, the company witnessed revenue growth across all segments, except for Quaker Foods North America (“QFNA”). Organic revenues also ascended for all segments, except for QFNA. The revenue decline in the QFNA segment can be attributed to the lapping of a high-demand environment in the prior-year quarter due to the pandemic. Nonetheless, the segment gained significant market share in the at-home breakfast, snacks and meals categories.

Revenues, on a reported basis, improved 7% in FLNA, 24% in PBNA, 26% in Latin America, 21% in Europe, 63% in AMESA and 41% in APAC segments, whereas the metric declined 13% in QFNA. Organic revenues increased 15% each at the Europe and AMESA segments, and it was up 6% for FLNA, 21% for PBNA, 16% for Latin America and 6% for APAC segments. However, organic revenues declined 14% for QFNA.

Operating profit (on a reported basis) grew 8% for FLNA, 104% for PBNA, 63% for Latin America, 15% for Europe, 325% for AMESA and 2% for APAC. However, it declined 34% for QFNA.


The company ended the second quarter with cash and cash equivalents of $5,449 million, long-term debt of $38,034 million, and shareholders’ equity (excluding non-controlling interest) of $15,299 million.

Net cash used in operating activities was $2,340 million as of Jun 12, 2021, compared with $1,462 million as of Jun 13, 2020.


Backed by the strong results, the company raised its guidance for 2021. It now expects organic revenue growth of 6% compared with mid-single digits stated earlier. Core constant currency EPS growth is now expected to be 11% versus high-single-digit growth mentioned earlier.

It continues to expect core effective tax rate of 21%. The company expects currency tailwinds to aid its revenues and core EPS by 1 percentage point in 2021, based on the current rates.

It remains committed to rewarding its shareholders through dividends and share buybacks. The company anticipates total cash returns to shareholders of $5.9 million, including $5.8 million of cash dividends and $106 million of share repurchases. It has completed its share-repurchase authorization and expects no more share repurchase through the rest of 2021.

Don’t Miss These Better-Ranked Stocks

Lamb Weston Holdings Inc. LW, with a long-term earnings growth rate of 10.8%, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mondelez International, Inc. MDLZ has an expected long-term earnings growth rate of 8.6%. It presently carries a Zacks Rank of 2.

Conagra Brands, Inc. CAG, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 7%.

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