What Disney and PepsiCo Said About the Consumer Economy

The stock market had an up-and-down day on Thursday. At the open, major market benchmarks posted sizable gains, but by the end of the day, the Dow Jones Industrial Average (^DJI 0.37%), S&P 500 (^GSPC 0.22%), and Nasdaq Composite (^IXIC 0.06%) all slid by as much as 1%.

Data source: Yahoo! Finance.

Many investors have watched closely for signs that ordinary consumers might be having trouble continuing to spend at the levels to which they've become accustomed. That made news from Walt Disney (DIS 0.23%) and PepsiCo (PEP 0.37%) particularly important, as both companies get their business from consumers who are willing to pay for the products and experiences they offer.

Below, you'll see what Disney and PepsiCo said, and how shareholders reacted to the latest news from the consumer stocks.

Disney wins a battle

Shares of Walt Disney fell 1% on Thursday. Yet the company's fiscal first-quarter financial report for the period ending Dec. 31 was relatively solid, and the entertainment giant got a much-needed victory in meeting the needs of activist investors who had challenged its business strategy.

Disney's first-quarter results were mixed. Revenue was 8% higher year over year, climbing to $23.5 billion. Although net income from continuing operations rose 11% from year-ago levels, adjusted earnings of $0.99 per share dropped 7% over the period.

As we've seen for several quarters now, Disney's theme-park unit posted the strongest performance, with a 21% jump in sales and operating income rising 25% from year-earlier levels. By contrast, the media and entertainment distribution segment, which includes businesses like the Disney+ streaming service, saw sales inch higher by just 1% and posted a small operating loss for the period.

Investors were arguably more pleased with Disney's decision to reduce its workforce by 7,000 as part of a broader $5.5 billion cost-cutting initiative. That was sufficient to persuade Nelson Peltz and his fellow activists at Trian Fund Management to call off their proxy fight, handing the recently returned CEO Bob Iger a big win in his efforts to keep Disney moving forward.

PepsiCo makes inflation fighters happy

Shares of PepsiCo, meanwhile, rose 1%. The snack and beverage giant reported fourth-quarter financial results that were strong and said it was likely done with price increases. Consumers breathed a sigh of relief.

PepsiCo's quarterly results showed strong growth in key metrics. Revenue jumped nearly 11% year over year to $28 billion, even after considering about 3 percentage points of headwinds from the strong U.S. dollar. PepsiCo's core earnings numbers came in at $1.67 per share, up 10% from the fourth quarter of 2021. Full-year 2022 core earnings of $6.79 per share were 11% higher than 2021's final figures.

Just about all of PepsiCo's financial gains came from pricing measures. Beverage sales volume was flat during the fourth quarter, and food sales volume actually fell 2% year over year. However, boosts in unit pricing were enough when combined with increased productivity and greater cost efficiency to generate double-digit revenue growth. Indeed, price increases have been so successful that PepsiCo said it likely wouldn't need to do further hikes.

Even better for shareholders, PepsiCo increased its dividend by 10% to $1.265 per share on a quarterly basis. That marks the 51st straight year that the beverage giant has delivered higher dividend payments. PepsiCo's results show that consumers have been willing to pay up for what they want.