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PepsiCo (PEP, $169.39) raised its full-year revenue and earnings forecast Wednesday after stronger-than-expected third-quarter sales driven by higher prices. It came out with quarterly earnings of $1.97 per share, beating the Zacks Consensus Estimate of $1.85 per share. This compares to earnings of $1.79 per share a year ago.
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For the quarter that ended Sept. 3, PepsiCo said revenue rose 9% from a year ago to $21.97 billion, topping Wall Street expectations. Despite prices surging 17% as the company tried to recoup double-digit price increases for raw ingredients as well as higher spending on transportation – it said higher prices don’t seem to be deterring customers, who consider brands like Frito-Lay and Cheetos an affordable treat.
Why it matters
PepsiCo has previously said it expected its costs to continue rising in the second half of this year. Broader US grocery prices continued to rise during the third quarter. They have soared 13.5% over the past year, the largest 12-month increase since 1979. In response, the company has said it was accelerating its cost management initiatives, including using smaller sizes for its variety packs. Its gross margins fell due to rising costs this comes as the company spent more on advertising, including a double-digit increase in marketing for Frito-Lay.
