PepsiCo (NASDAQ:PEP) has delivered solid returns for investors in recent years, during a period when many of its peers in the consumer staples industry have been struggling. The company's booming snack food business has been compensating for sluggish demand for sweet drinks and diet sodas, and pushing overall sales higher. In fact, in the first quarter, PepsiCo reported its fastest growth in years.

Investors are expecting strong, but more modest, results when PepsiCo announces second-quarter results on Tuesday.

Two women drinking soda.

Image source: Getty Images.

The portfolio checkup

PepsiCo's diverse product lineup is a key reason why investors like the stock. But it also tends produce uneven results across brands like Frito-Lay, Gatorade, Quaker, and Diet Pepsi. Similar to Coca-Cola (NYSE:KO), PepsiCo has reported weak organic sales volumes in its beverage segment. But the difference between it and its chief rival has been its booming snack division, which propelled its overall sales upward by more than 5% last quarter, its fastest growth rate in three years.

CEO Ramon Laguarta and his team predicted weaker growth over the next few quarters, in part because the company has to deal with manufacturing bottlenecks, as well as sluggish demand for diet sodas and for many of its food brands. Investors will find out on Tuesday whether those challenges ended PepsiCo's nine-month streak of accelerating sales growth, and whether that forecast slowdown was modest, or big enough to lead management to downgrade its outlook.

Spending money

PepsiCo is predicting that earnings will drop by about 1% in fiscal 2019 as the company spends aggressively on initiatives like upgrading its supply chain and giving its brands more marketing support. Executives said back in April that it was still too soon to tell whether these projects were paying off; they might have more clarity to give investors this week.

The more important metric to watch when it comes to profitability will be sales volume, which only contributed 1 percentage point of PepsiCo's 5% revenue increase last quarter. The company will need a better balance of growth from sales volumes and rising prices if it's going to meaningfully increase its expansion pace. If management again leaves its modest 4% revenue growth target in place on Tuesday, it might be due to its continuing difficulties in this area.

Capital returns

The outlook is more decidedly positive when it comes to direct shareholder returns. In fact, investors can anticipate about $8 billion of Pepsi's $9 billion in operating cash flow will be returned to them through dividends and stock repurchases this year. Coke, by contrast, is forecasting both slower growth and a lower overall cash year in 2019.

Laguarta and his team aren't likely to shift those capital return goals this week. However, with half of the fiscal year behind them, executives will have a better idea about where sales and earnings might end up.

That knowledge will inform their aggressiveness as they seek to spend about $3 billion on stock buybacks this year, and decide how much to next increase the dividend by. Assuming it comes on schedule, that will be PepsiCo's 47th consecutive annual payout boost.