PepsiCo adjusts revenue forecast due to sluggish performance in North American snacking and international markets.

• Wall Street's estimates were exceeded by PepsiCo's fiscal third-quarter earnings, but its revenue fell short of expectations.
• The food and beverage giant lowered its full-year outlook for organic revenue.
• Its Quaker Foods North America business continued to impact its sales with related recalls.

Its full-year outlook for organic revenue was lowered on Tuesday after two consecutive quarters of weaker-than-expected sales.

The CEO of Quaker Foods North America, Ramon Laguarta, stated that the recalls had negative effects on the company's performance in the quarter, including decreased demand in the U.S. and disruptions in international markets.

Pepsi now anticipates a low-single-digit increase in organic revenue for 2024, which is lower than its previous forecast of 4% growth. However, the company maintained its forecast for an increase of at least 8% in its core constant currency earnings per share.

Shares of the company fell 1% in premarket trading.

Based on a survey of analysts by LSEG, the company's reported results differed from Wall Street's expectations.

• Earnings per share: $2.31 adjusted vs. $2.29 expected
• Revenue: $23.32 billion vs. $23.76 billion expected

Pepsi's third-quarter net income decreased by $160 million, resulting in $2.13 per share, compared to $2.24 per share in the previous year.

Excluding items, the company earned $2.31 per share.

In the quarter, organic revenue increased by 1.3%, while net sales decreased by 0.6% to $23.32 billion.

The company reported that both its food and beverage divisions experienced a 2% decline in volume last quarter, with executives stating that shoppers across all income levels are changing their behavior.

In June, Pepsi officially closed a plant linked to the recalls, although production had already stopped. Quaker Foods North America reported the steepest drop-off in volume, with a 13% slide. The company issued its first recall for potential salmonella contamination in December, then widened it in January.

Laguarta and Pepsi CFO Jamie Caulfield stated in prepared remarks that the consequences of the recalls are now diminishing.

Despite Frito-Lay North America experiencing a 1.5% decline in volume, the company has been working to increase the value of its snacks, such as Cheetos, SunChips, and Stacy's pita chips, and improve their in-store availability. Although the division's volume is improving sequentially, the broader snack category has slowed down compared to its historical performance.

Pepsi executives stated in their prepared remarks that despite outperforming packaged food categories in previous years, salty and savory snacks have underperformed year-to-date.

In the quarter, revenue growth was observed for brands such as Gatorade and Pepsi, while the volume for Pepsi's North American beverage business decreased by 3%.

Both food and drinks saw a decrease in volume in the Latin America, Africa, Middle East, and South Asia markets.