PepsiCo’s hefty quarter pokes a hole in idea of an Ozempic-fueled sell-off

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Ozempic and other weight-loss drugs didn’t slim down the third-quarter results for PepsiCo (PEP).

The maker of Pepsi soda and Frito Lay snacks hammered Wall Street profit estimates on Tuesday, sending shares 3% higher in pre-market trading.

The company notched sales gains in all its business segments, save for Africa/Middle East. Core earnings per share growth tallied 16% from the prior year, outpacing sales growth by more than two times.

The Earnings Rundown

  • Net Sales: +6.7% year over year to $22.3 billion vs. estimates for $23.38 billion

    • Frito-Lay North America Sales: +7% year over year to $5.95 billion vs. estimates for $5.96 billion

    • Quaker Foods North America Sales: +5% year over year to $747 million vs. estimates for $729.2 million

    • North America Beverages: +8% year over year to $7.16 billion vs. estimates for $6.98 billion

    • Europe Sales: +2% year over year to $3.7 billion vs. estimates for $3.87 billion

    • Latin America Sales: +21% year over year to $3 billion vs. estimates for $2.98 billion

    • Africa/Middle East Sales: -6% year over year to $1.61 billion vs. estimates for $1.64 billion

    • Asia Pacific Sales: +4% year over year to $1.21 billion vs. estimates for $1.22 billion

  • Organic Sales Growth: +8.8% year over year vs. estimates for +8.3%

  • Core EPS: +16% year over year to $2.25 vs. estimates for $2.16

  • Core EPS Guidance: +13% year over year versus previous outlook for 12% growth

Yahoo Finance Hot Take

The normally steady-Eddie shares of PepsiCo have fallen about 12% in the past three months (alongside sell-offs in other food-related stocks), as chatter permeates Wall Street about the impact to the industry from the proliferation of new weight-loss drugs like Ozempic.

PepsiCo’s results and CEO commentary on earnings day pokes a hole in the thesis behind the sell-off, however.

The company not only lifted its full-year earnings outlook, but said it sees 2024 sales and earnings growth at the top end of its longer-term targets. CEO Ramon Laguarta called out further “strength” and “resilience” in PepsiCo’s product categories.

KIEV, UKRAINE - 2020/07/09: Packets of Lay's potato chips are seen displayed at a supermarket store. Lay's has been owned by PepsiCo through Frito-Lay since 1965. (Photo by Igor Golovniov/SOPA Images/LightRocket via Getty Images)

Packets of potato chips from Lay’s, owned by PepsiCo. (Igor Golovniov/SOPA Images/LightRocket via Getty Images)

The vibe is similar to what Constellation Brands CEO Bill Newlands told Yahoo Finance post-earnings last week — none of his customer research shows a reduced appetite for beer because of Ozempic (video above).

If the normally cautious PepsiCo thought Ozempic would reduce the heft of its profits, investors would have received a slimmed-down outlook today. This is not a management team that likes to surprise investors negatively.

The fact they didn’t is telling.

We’ll learn more about PepsiCo’s outlook from long-time vice chairman and CFO Hugh Johnston on Yahoo Finance Live today at 9:15am. Tune in our homepage, Youtube, Roku, and the Yahoo Finance app.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].

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