PepsiCo (PEP 0.40%), the global food and beverage giant, delivered steady growth in the first quarter of 2024 despite facing challenges. Here's a summary of the company's quarterly filing.
PepsiCo delivers solid Q1 results
PepsiCo reported net revenue growth of 2% to $18.3 billion in the first quarter of 2024, driven by pricing strategies and organic volume growth. The company's operating profit increased by 3% to $2.7 billion, primarily due to effective net pricing and productivity savings, which were partially offset by higher operating costs.
Diluted earnings per share (EPS) increased by 6% to $1.48, while core diluted EPS grew by 7% to $1.61. However, cash flow used in operating activities increased to $1.0 billion from $0.4 billion in Q1 2023, primarily due to what the company called "unfavorable working capital comparisons." Despite this, PepsiCo remains focused on driving growth and profitability through effective pricing strategies, productivity savings, and volume growth in key markets.
Mixed performance across business segments
PepsiCo's business segments experienced mixed results in Q1 2024. Frito-Lay North America saw a 2% increase in net revenue despite a 2% volume decline, while operating profit fell by 3% due to higher costs. Quaker Foods North America faced significant challenges, with net revenue down 24% and volume down 22% due to the impact of a voluntary product recall of certain bars and cereals, resulting in a 126% decline in operating profit.
It largest segment by sales, PepsiCo Beverages North America, managed to increase net revenue by 1% despite a 5% volume decline, with operating profit growing by 5.5%. The company's international segments showed promising results, with the Latin America region, the European region, and the Asia Pacific, Australia and New Zealand and China region all reporting net revenue growth. However, the Africa, Middle East and South Asia region saw a 10% decline in operating profit due to higher commodity costs.
Navigating challenges and investing in the future
PepsiCo continues to navigate challenges from higher commodity and operating costs through a combination of cost management, productivity initiatives, and pricing actions. The company's priorities include investing in its brands, go-to-market systems, supply chain, sustainability initiatives, and digital capabilities to drive long-term growth.
PepsiCo continues making progress on its multi-year restructuring plan (announced in 2019) geared toward productivity. Currently, that plan is expected to amount to a total of $3.65 billion in pre-tax charges, consisting of severance and asset impairments from developments like plant closures among other initiatives.
Shareholders can expect PepsiCo to return $8.2 billion in 2024 through $7.2 billion in dividends and $1.0 billion in share repurchases. This demonstrates the company's confidence in its ability to generate strong cash flows and create value for investors, even in the face of challenging market conditions.
What's next for PepsiCo?
PepsiCo's Q1 2024 results showcase the company's resilience and ability to adapt to changing market dynamics. As the company continues to focus on driving growth and profitability, investors should monitor PepsiCo's progress in managing costs, implementing productivity initiatives, and executing its long-term strategic plans.
