PEPSICO Inc on Tuesday raised its annual sales and profit forecasts after beating first-quarter results on the back of steady demand for its sodas and snacks, as well as price hikes undertaken to offset rising costs.
Major consumer goods companies hiked prices to battle sky-rocketing costs of everything from aluminum cans to labor and shipping, triggered by supply-chain disruptions during the pandemic and aggravated by the Russia-Ukraine conflict.
"We don't expect commodity prices to decrease for us, only the rate of inflation will get a little bit lighter during the course of the year," Chief Financial Officer Hugh Johnston told Reuters.
PepsiCo's average prices jumped 16% in the first quarter, while organic volume slipped 2%.
The company's shares rose 2% in premarket trading as the results pointed to a resilient consumer and followed a similar performance announced by Coca-Cola a day earlier.
Average price of 192 ounces of PepsiCo's soda in the U.S. rose to $8.67 in 2022 from $7.57 in 2021, according to NielsenIQ's data. It was $9.67 so far in 2023.
In February, however, the Frito-Lay maker said it would not raise prices of its products further in contrast to rival Coca-Cola.
The raised forecast at this stage in the year suggests "very deep confidence in what is going on in the snacking business and also the improvements on the beverage side," said Markus Hansen, a portfolio manager at Vontobel Quality Growth, adding PepsiCo is historically very conservative.
Sales in the North America beverage unit, PepsiCo's largest business and which houses 7UP and Gatorade, rose 8% in the March quarter.
PepsiCo said it expects 2023 organic revenue to rise 8%, compared with its prior forecast of a 6% increase.
The company now expects annual core earnings per share of $7.27, compared with $7.20 earlier.
Coca-Cola had maintained its annual forecasts. - Reuters
