PepsiCo reports a very rare revenue miss, but profit beat and dividend lifted

“Consumers are likely to remain watchful with their budgets and choiceful with their purchases,” the company said in the prepared post-earnings call remarks, posted on its website.

The stock
PEP,
-3.21%
sank 3% in morning trading. That puts it on track for the biggest one-day loss since it fell 5.2% on Oct. 5, 2023, and to suffer the worst one-day post-earnings performance in at least five years, based on available data provided by FactSet.

Net income jumped to $1.3 billion, or 94 cents a share, from $518 million, or 37 cents a share, in the same period a year ago. Excluding nonrecurring items, core earnings per share of $1.78 beat the FactSet consensus of $1.72.

Revenue slipped 0.5% to $27.85 billion, while the FactSet consensus called for an increase of 1.4% to $28.40 billion.

That was the first time revenue didn’t beat expectations in at least five years, based on available FactSet data going back to February 2019, when results for the fourth quarter of 2018 were reported.

“Category growth rates are normalizing as consumer behaviors largely revert to pre-pandemic norms and net revenue realization moderates as inflationary pressures are expected to abate,” said Chief Executive Ramon Laguarta.

Among the company’s business segments, PepsiCo Beverages North America revenue fell 2.4% to $7.91 billion, Frito-Lay North America revenue declined 3% to $7.47 billion and Quaker Foods North America revenue sank 15.7% to $893 million.

The only geographic region that reported growth was Latin America, where revenue rose 17.6% to $3.97 billion.

Separately, the company said it raised its annual dividend to $5.42 a share from $5.06 a share, effective in June.

Based on current prices, the new dividend rate implies a dividend yield of 3.21%, which is above the yield for the Consumer Staples Select Sector SPDR ETF
XLP,
-0.79%
of 2.58% and more than double the implied yield for the S&P 500 index
SPX,
+0.32%
of 1.43%.

For 2024, the company said it expects organic revenue growth of “at least” 4%. In October, the company had said it expected 2024 organic revenue growth “at the upper end” of its long-target range of 4%-to-6% growth.

PepsiCo expects 2024 core EPS of “at least” $8.15, compared with the FactSet consensus of $8.15.

The stock has gained 1.5% over the past three months, while the SPDR consumer staples ETF has rallied 7% and the S&P 500 has climbed 15.2%.