MW People have cut back on salty snacks, and PepsiCo misses on revenue again

By Tomi Kilgore

Frito-Lays sees weakness and Quaker Foods still feels effects of granola bars recall, but profit beat and dividend raised

Shares of PepsiCo Inc. slumped Tuesday, after the beverage and snack giant reported a slight but surprising decline in quarterly revenue, amid weakness in its North America Frito-Lay business, as consumers continued to pull back on salty and savory snacks.

Meanwhile, profit rose and extended its long streak of beats and the company said it will boost its dividend by 5%, which would lift the stock's yield to more than triple the implied yield of the S&P 500 index SPX.

"Our businesses remained resilient in 2024, despite subdued category performance trends in North America, the continued impacts related to a recall in our Quaker Foods North America division and business disruptions due to geopolitical tensions in certain international markets," said Chief Executive Ramon Laguarta.

The stock $(PEP)$ fell 2.5% in morning trading. It has now lost 3.7% this year, after declining 10.5% in 2024, which was the worst yearly performance since it sank 27.8% in 2008.

For the fourth quarter to Dec. 28, net revenue declined 0.2% from a year ago, to $27.78 billion from $27.85 billion, while the FactSet consensus was for slight growth to $27.89 billion. That marked the third straight quarter in which revenue missed forecasts.

Revenue for Frito-Lay North America fell 2.1% to $7.32 billion.

The company said salty and savory snacks underperformed the broader packaged food category, but that followed multiple years of outperformance.

"We believe the cumulative impacts of inflationary pressures and higher borrowing costs on consumer budgets, difficult laps from above-trend salty and savory category growth in previous years and continued growth in away-from-home dining and experiential spending have impacted our categories and broader packaged food," Chief Executive Ramon Laguarta and Chief Financial Officer Jamie Caulfield said in prepared remarks for the post-earnings call with analysts.

PepsiCo is investing in improving its Frito-Lays business by relaunching its Simply product lineup, which contains no artificial flavors or colors, and by growing the presence of its "multicultural" products with "ethnic-inspired" flavors, such as its Sabritas, Marias and Natu chip brands.

Quaker Foods North America revenue was also down 2.1% to $874 million, and operating profit dropped 38%. The company said it expects revenue to "gradually improve" in 2025, as the impacts of the recall of its granola bars and granola cereals in December 2023 due to concerns over salmonella contamination get lapped.

PepsiCo Beverage North America revenue was little changed at $7.91 billion. The company said it continued to focus on the fastest-growing segments of the category, such as zero sugar, functional hydration and sports nutrition.

Within its international business, which accounted for about 40% of total revenue, organic revenue growth for the quarter was 6%, as convenient foods revenue rose 4% and beverages revenue jumped 13%.

For PepsiCo's bottom line, net earnings for the latest quarter rose to $1.52 billion, or $1.11 a share, from $1.30 billion, or 94 cents a share, in the same period a year ago.

Excluding nonrecurring items, core earnings per share rose $1.96, beating the FactSet consensus of $1.94. That marked at least the 22nd-straight quarter that EPS beat forecasts, based on available FactSet data.

For 2025, the company expects core EPS growth in the low-single-digit percentage range. The current FactSet consensus for 2025 EPS of $8.52 implies 4.4% growth.

The raised its annual dividend to $5.69 a share from $5.42 a share, effective with the dividend expected to be paid in June.

At current prices, the new annual dividend rate implies a dividend yield of 3.88%, which compares with the yield for the Consumer Staples Select Sector SPDR ETF XLP of 2.77% and the implied yield for the S&P 500 of 1.26%.

-Tomi Kilgore

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February 04, 2025 10:30 ET (15:30 GMT)

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