PepsiCo (PEP -0.11%) investors had high expectations heading into the company's first-quarter earnings update. The snack and beverage giant has posted strong growth through every phase of the pandemic and rewarded shareholders with more cash along the way. Most investors were looking for a continuation of those trends in Tuesday's report.

The operating update didn't disappoint. Pepsi announced a blistering sales spike through late March, along with just a modest profitability drop due to soaring costs.

Let's dive right in.

A person selects a beverage at a grocery store.

Image source: Getty Images.

Beating targets

Investors were looking for sales to rise at a 7% pace in the quarter, but revenue actually reached 9.3% instead. Organic sales trends, which paint a clearer picture of demand, were even better. Pepsi notched a 14% spike in that core metric, marking an acceleration over last year's 10% increase. For context, the company had been growing sales at about 5% annually before the pandemic.

Management noted strength in both the snack and beverage segments and across every geographic region. There were pockets of weakness due to the war in Ukraine and new COVID-19 lockdowns in China, but overall trends demonstrated Pepsi's brand power in a positive selling environment for packaged foods. "We delivered strong results which reflect our presence in growing, global categories," CEO Ramon Laguarta said in a press release.

Earnings pressures

It wasn't all good news in this report. Costs jumped during the period, and Pepsi had to take a charge related to the suspension of some operations in Russia. These factors kept a lid on earnings, which rose just 7% compared to the 14% spike in organic sales.

Look deeper, though, and there's plenty of evidence hinting at higher profits ahead. Pepsi was able to boost prices without sacrificing volume growth. Customers shifted demand toward higher-margin offerings, too, in brands like Doritos and Pepsi Zero Sugar.

The beverage business saw a 21% boost in core operating profit, in fact, thanks in part to the popularity of new energy drinks. "We continue to target more profitable growth," executives said in an investor presentation, "by innovating and extending our brands ."

Raising the bar

Pepsi followed rival Coca-Cola (KO -0.53%), which earlier in the week raised its sales outlook while affirming other key parts of its 2022 forecast. Pepsi now sees organic sales rising by 8% this year compared to the previous 6% target. Core earnings will still expand at 8%, they predicted, as the extra sales leverage is partly offset by accelerating inflation.

Management didn't move its cash return target and still expects to deliver about $8 billion to shareholders this year, mainly through dividend payments. That cash, combined with accelerating sales growth and steady profitability, suggests investors will generate solid returns simply by holding this stock over the long term.