PepsiCo (PEP) Q3 2024 earnings summary

Executive summary

• Q3 2024 net revenue was $23.3B, down 1% year-over-year, with organic revenue up 1.3%; operating profit fell 4% to $3.87B, and net income attributable to PepsiCo was $2.93B, down 5%.

• For the 36 weeks, net revenue rose 1% to $64.1B and operating profit increased 3% to $10.6B; net income attributable to PepsiCo grew 4% to $8.06B.

• Results were impacted by higher operating costs, restructuring charges, and a significant product recall in Quaker Foods North America.

• Productivity and cost transformation programs, including automation and digitalization, supported margin expansion and profitability.

• Resilient performance despite subdued North America trends, Quaker Foods recall, and geopolitical disruptions.

Financial highlights

• Q3 gross margin was 55.4% (up from 54.5%); operating margin declined to 16.6% from 17.1%; Q3 GAAP EPS was $2.13 (down 5%), core EPS was $2.31 (up 5% in constant currency).

• Free cash flow for the 36 weeks was $3.5B, down from $5.2B in the prior year, mainly due to unfavorable working capital.

• Cash and cash equivalents at period end were $7.3B, down from $10.1B at the end of the prior year.

• Margin expansion continues at the total PepsiCo level, with PBNA and international segments contributing meaningfully.

• Organic revenue grew 1.3% in Q3 and 1.9% year-to-date; foreign exchange reduced net revenue by 2% in Q3.

Outlook and guidance

• 2024 organic revenue growth outlook revised to low-single-digit (previously ~4%) due to slower U.S. recovery and geopolitical impacts.

• At least 8% core constant currency EPS growth expected for 2024; core EPS of at least $8.15 (up 7% from 2023).

• Management expects to return approximately $8.2B to shareholders in 2024, including $7.2B in dividends and $1.0B in share repurchases.

• A 7% increase in the annualized dividend to $5.42 per share was announced, effective June 2024.

• Approximate 1 percentage point FX headwind expected on reported net revenue and core EPS.