Investors had modest expectations for PepsiCo's (PEP -0.06%) business this year, thanks to the difficult comparison with 2020's surging sales during the initial phases of the global pandemic. The consumer staples giant is targeting another year of strong growth in 2021, but costs will be rising and there will be less direct cash returns to shareholders.

On Thursday, the company affirmed most of the key pillars of its outlook while demonstrating that it can keep expanding sales even against some of the hardest year-over-year comparisons it has faced.

Let's dive right in.

Two women drinking sodas outside.

Image source: Getty Images.

Sales growth

Organic sales edged up by 2% overall, with gains coming from both the food and beverage divisions. Sure, that marked a sharp slowdown from last quarter's 6% spike. And the company had to rely more on price increases over volume gains. But Pepsi was going up against a 2020 period that included booming sales as consumers started stocking up during the start of the pandemic.

Organic sales jumped 8% in that period, so it should be considered a win for Pepsi to keep sales in positive territory a year later. There were other headwinds, too, according to management.

"We successfully overcame challenges related to difficult year-over-year comparisons, uneven recoveries across many of our international markets, and weather-related business disruptions in the U.S.," CEO Ramon Laguarta said in a press release.

Profits and cash

Meanwhile, shareholders got positive news on the earnings front as operating profit jumped to $2.3 billion from $1.9 billion a year ago. Management had been warning investors to expect modest earnings gains this year as the company pivots toward a growth focus by investing in its manufacturing and distribution networks. But a 14% boost in core earnings per share marked a strong start to the year and might make it easier to beat that outlook.

Cash production was muted compared to last year, when the company bulked up on debt to hedge against a potentially catastrophic sales disruption. Yet Pepsi is still holding nearly $6 billion on the books heading into the second quarter of 2021. "Our results are indicative," Laguarta said, "of our...agile supply chain and go-to-market systems and strong marketplace execution."

Right on pace

The solid start to the year gave management confidence to affirm their outlook that calls for a mid-single-digit organic sales increase and slightly faster growth in reported earnings per share in 2021. Rival Coca-Cola might enjoy a more dramatic rebound, mainly thanks to the fact that its portfolio is more focused on on-the-go beverages.

On the downside, Pepsi still plans to spend almost nothing on stock buybacks this year as it focuses on investing in the business.

The good news is that these projects should build a foundation for faster annual growth that's comparable to, or even better than, the 5% increase it logged in each of the last two fiscal years. And since the stock hasn't risen much in the last year, that result might be enough to generate strong returns for holding shares. Those returns will be amplified by a dividend that today yields almost 3%.