PepsiCo, Inc. (NASDAQ: PEP) experienced a slight downturn in early trading on Tuesday despite reporting stronger-than-expected fourth-quarter results that underscored growth momentum in both domestic and international segments. The company reported adjusted earnings per share of $2.26 for the quarter, narrowly surpassing the consensus estimate of $2.24. Revenues stood at $29.34 billion, marking a 5.6% year-over-year increase and outpacing analyst projections of $28.972 billion.
Chairman and CEO Ramon Laguarta highlighted the sequential improvement in both reported and organic revenue growth during the quarter, emphasizing the positive performance in North America and international markets alike.
In response to consumer feedback reflecting sensitivity to price increases, PepsiCo plans to reduce prices on key snack products, including Lay's potato chips and Flamin' Hot Cheetos, by as much as 15%. This strategic move aims to regain price-conscious customers who have been deterred by earlier price hikes.
The Wall Street Journal reported that customers articulated a clear need for greater value, a sentiment echoed by Rachel Ferdinando, PepsiCo’s U.S. food division CEO, who acknowledged the company’s awareness of the demand for more affordable pricing.
Segment Performance and Profit Metrics
Segment analysis reveals that PepsiCo Foods North America saw revenues rise by 1.5% in the quarter; however, operating profit fell by 6%, primarily due to increased operating expenses. The beverages segment in North America experienced a 4% revenue gain. The international beverages franchise grew revenues by 3.5%, while its operating profit more than doubled with a 116% increase.
Further regional breakdown shows that the Europe, Middle East, and Africa (EMEA) region posted a 12% revenue increase and a robust 72% increase in operating profit, signifying exceptional operational efficiency improvements.
Financially, the company demonstrated strength with gross profit climbing to $15.62 billion compared to $14.60 billion in the previous year, while gross margin expanded by 0.6 percentage points to 53.2%. Operating profit surged to $3.56 billion from $2.25 billion year-over-year, signaling enhanced profitability despite cost pressures.
PepsiCo concluded the quarter holding $9.16 billion in cash and cash equivalents, underscoring a strong liquidity position.
Capital Return and Shareholder Commitments
The company reconfirmed its fiscal 2026 guidance issued in December and announced a 4% increase in its annualized dividend per share effective from the June 2026 payment, marking the 54th consecutive year of dividend growth.
Additionally, PepsiCo authorized a new share repurchase program permitting up to $10 billion in buybacks through February 28, 2030, reinforcing its commitment to returning capital to shareholders.
Future Outlook and Strategic Initiatives
Looking ahead, Laguarta forecasts an acceleration of growth in fiscal 2026, driven by refreshed brands, expanded innovation in burgeoning categories including functional foods, and targeted value propositions tailored to consumers pressured by affordability concerns.
He underscored that record productivity gains would provide crucial funding for these growth initiatives, helping to boost performance in North America while maintaining resilience in international operations.
PepsiCo’s fiscal 2026 adjusted earnings per share guidance ranges from $8.55 to $8.71, aligning with Wall Street's expectations at the lower end.
Market Reaction
Despite its strong fundamental performance and strategic pricing adjustments, PepsiCo’s shares declined marginally by 0.88% to $153.84 in premarket trading on the day following the earnings announcement, per Benzinga Pro data.