PepsiCo's results exceed expectations on international growth, soda demand rebound

PepsiCo PEP reported better-than-expected quarterly results on Thursday, driven by steady demand for its sodas and snacks in the U.S. and other major markets, including Europe.

The Gatorade owner sounded a more upbeat tone in its comments this quarter, after previously warning that heightened macro and consumer uncertainties could be a drag on its business in the U.S. and some international markets this year.

"Our business remained resilient during the second quarter, navigating through a complex geopolitical and macroeconomic environment," PepsiCo executives said in a statement.

PepsiCo, like its rival Coca-Cola, has responded to a shift in consumer demand for healthier drinks and snacks by offering more options, such as its recently acquired prebiotic soda brand Poppi.

The company also said it would rebrand Lay's and Tostitos by the end of the year with no artificial colors or flavors, and that its K-12 food portfolio will also stop using artificial colors.

"If the consumer is telling us that they prefer products that have sugar and they prefer products that have natural ingredients, we will give the consumer products that have sugar and have natural ingredients," CEO Ramon Laguarta said.

President Donald Trump said on Wednesday that Coca-Cola had agreed to use cane sugar in its beverages in the U.S.

PepsiCo's North America foods business, which houses brands such as Lay's and Cheetos, saw an improvement in volumes as it offered products at lower price points, while adding new flavors to its popular snacking brands to cater to a diverse palate.

The company said it was closing some manufacturing facilities to help match lower demand in the snacks category and would adjust its workforce accordingly to lower costs.

PepsiCo also backed its strategy to mitigate the impact of U.S. President Donald Trump's sweeping tariff policy on its global supply chain, including adjusting the sourcing of some raw materials.

The Gatorade maker's shares were up 6% on Thursday as a weaker dollar helped the Lay's parent forecast a smaller annual profit drop. PepsiCo's international business accounts for about 40% of its total net revenue.

"Expectations were low coming in and while results were not overly robust, they exceeded expectations," RBC Capital Markets analyst Nik Modi said.

The company now expects full-year core earnings per share to fall 1.5%, compared with a 3% decline expected previously.

The Quaker Oats parent maintained its forecast for flat annual core earnings on a constant currency basis, which it cut last quarter to account for the hit to its supply chain costs from tariffs.

Organic revenue at PepsiCo's North America beverage unit rose 1% in the second quarter, following a 2% fall in the prior three-month period.

PepsiCo's second-quarter revenue rose about 1% to $22.73 billion, compared with analysts' average estimate of a 0.99% decline to $22.28 billion, according to data compiled by LSEG.

Excluding certain impairment charges, PepsiCo earned $2.12 per share, beating estimates of $2.03 per share.