For this quarter, PEP generated EPS of $1.54 vs. the $1.51 consensus with revenue in-line at $16.45 bln.
PEP also reaffirmed its FY19 guidance, seeing EPS of $5.50 vs. the $5.53 consensus while projecting organic growth of 4%.
Click here to access PEP's earnings press release.
While PEP's track record of managing costs and investor expectations has been stellar for some time, its top-line performance was lacking. In order to accelerate growth, PEP brought in a new CEO, Ramon Laguarta, last October. One of his primary tasks has been to stimulate stronger, more sustainable organic revenue growth.
To do so, Mr. Laguarta has taken a varied approach that has included broadening PEP's portfolio and packaging, strengthening its core Frito-Lay and PepsiCo Beverage businesses in North America, using healthier ingredients, and ramping up marketing investments.
The actions appear to be working, as PEP posted solid organic revenue growth of 4.5% following growth of 5.2% last quarter -- its highest quarterly growth rate in over three years.
PEP's snack business led the way, with revenue up 4.5%, while its beverage unit grew by 2.5%. Most of the increase in both segments was driven by price increases, but PEP's sparkling water brand Bubly is experiencing strong demand as a healthier alternative to soda.
The company did well to identify changing consumer habits toward healthier options. Specifically, the success of sparkling water brands like La Croix caught its attention. Looking to gain exposure to that hot market, PEP launched Bubly in February of 2018.
Shortly thereafter, PEP acquired SodaStream in December 2018. After initially focusing on carbonated sodas, SodaStream re-positioned itself as a sparkling water brand a few years ago.
Both of these product lines have been strong for PEP, and the company has built on them by launching a few new flavors this year (berry, lime, mango) that have resonated well with consumers.
While focusing on improving top-line growth, PEP hasn't taken its eye off the ball as it relates to cost management. It has cut costs through the automation of certain processes, resulting in a large workforce reduction and eventual plant closures.
Key Takeaways: Exceeding analysts' earnings expectations is commonplace for PEP. What investors are mainly interested in is whether PEP can generate stronger organic revenue growth.
While not as strong as last quarter's performance, PEP's solid 4.5% growth this quarter further validates the new CEO's strategy.