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What’s happening: Shares of PepsiCo gained on Tuesday, after the company released results for its third quarter.
What happened: The beverage giant posted better-than-expected earnings for its third quarter with several price hikes.
PepsiCo raised its profit forecast for the year and indicated it is planning more “modest” price hikes going into 2024.
How were the results: The Purchase, New York-based company reported a single-digit increase in sales for the third quarter.
Why it matters: PepsiCo started the earnings season for consumer goods companies amid rising concerns around the several price increases weighing on overall demand. PepsiCo continued to pass on rising costs to customers through price hikes for snacks and beverages. The company raised prices by approximately 11% through the third quarter, compared to a 15% rise in the prior quarter.
Due to the price hikes, the company recorded sales growth despite flat case volumes and snack volumes declining about 1.5%.
Net revenues from Frito-Lay North America rose 7% year-over-year, while sales from Quaker Foods North America increased 5%, and PepsiCo Beverages North America rose 8% in the recent quarter.
Latin America sales surged 21% year-over-year, while Europe sales rose 2% during the quarter.
The company’s operating margins expanded by 186 basis points to 17.1%, while operating income climbed 19.7% to $4 billion for the quarter.
“We believe that our businesses can continue to perform well in the coming years with category growth normalizing, as we have made numerous investments in our brands, manufacturing capacity, go-to-market systems, supply chain, technology, and people, to execute against our strategic framework and modernize our company,” CEO Ramon Laguarta said during the earnings call.
Management guided to organic revenue growth of 10% for fiscal 2023. They also raised their guidance for core constant currency EPS growth to 13%, from its prior forecast of 12%.
PepsiCo raised its full-year adjusted earnings forecast from $7.47 to $7.54.
How shares responded: PepsiCo’s shares rose 1.9% to close at $164.40 on Tuesday, following the release of quarterly results. The stock lost around 8% over the past month.
What to watch: Investors will watch price hikes by the company, which might impact PepsiCo’s overall results ahead, especially after CFO Hugh Johnston said there could be “some modest level of price increases” into next year.
Markets will also continue monitoring the impact of weight-loss drugs on the demand of the company’s packaged products. The company’s shares had been under pressure last week due to the popularity of weight-loss drugs.
Context: Equity markets in Europe settled higher on Tuesday.
Details: European stocks had plummeted to six-month lows earlier in the month as bond yields climbed to multi-year highs. However, stocks rebounded on Tuesday, with the pan-European index recording its biggest single-session percentage gain in around a year.
Investors monitored dovish remarks by US Federal Reserve officials, which provided a boost to overall investor risk sentiment.
European gas prices rose sharply, following damage to an underwater gas and communications pipeline between Finland and Estonia.
The STOXX Europe 600 Index gained 1.96% to close at 452.48 on Tuesday, with all sectors closing in the positive zone. Travel stocks were among the top performers, rising around 3.9% despite airlines cancelling flights to Israel.
Mining stocks also surged around 2.9% and autos rose about 2.5% during Tuesday’s session, amid reports that Beijing was looking to raise its budget deficit for 2023.
London’s FTSE 100 gained 1.82% to 7,628.21, while Germany’s DAX 40 and France’s CAC 40 added 1.95% and 2.01%, respectively.
What to watch: Investors await inflation rate data from Germany today. Analysts expect Germany’s consumer price inflation to ease to 4.5% year-over-year in September, from the previous month’s level of 6.1%. Germany’s consumer prices are likely to increase by 0.3% for September, unchanged from the pace in August.
Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.40%, 0.52% and 0.56%, respectively.
Germany announced a new military support package for Ukraine worth around €1 billion. The news sent the safe-haven US dollar index slightly lower this morning.
The Philippines said its net foreign direct investment surged 35.7% year-over-year to $0.75 billion in July, lending support to the PHP/USD forex pair.
South Korea recorded a current account surplus of $4.81 billion for August. This being the fourth consecutive month of a surplus sent the KRW/USD pair higher in forex trading this morning.
Japan’s Reuters Tankan sentiment index for manufacturers came in unchanged at +4 in October, which exerted slight pressure on the JPY/USD forex pair.
Greece’s annual inflation rate eased to 1.6% in September, from 2.7% in the prior month, which sent the EUR/USD pair slightly higher in forex trading this morning.
Japan’s machine tool orders, Turkey’s current account and retail sales, Brazil’s inflation rate, Canada’s value of building permits, US MBA mortgage applications, producer price inflation and API crude oil stocks change, Russia’s inflation rate, as well as China’s vehicle sales, new yuan loans, money supply M2, outstanding yuan loan growth and total social financing.
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