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PepsiCo (PEP) is moving higher today after reporting its Q3 results this morning. The beverage and snack food giant beat EPS expectations, while reported revenue growth accelerated, increasing 2.6% yr/yr to $23.94 bln, which was in line with expectations. Organic revenues increased 1.3% compared to 2.1% in Q2.

• Revenue growth accelerated despite a 1% volume decline; PBNA delivered 2% organic growth with a 3% volume headwind from the Pack Water transition. Beverage volume grew excluding Pack Water.
• PFNA margin trends improved as cost cuts and tighter promotions gained traction; permissible snacks like Sun Chips, Simply, and Quaker rice cakes posted double-digit growth.
• International remained strong with 4% organic growth (18 straight quarters of mid-single-digit or better); International beverages led with 6% organic growth.
• Management noted away-from-home is growing about 2-3x than that of retail.
• Highlights included double-digit growth in Pepsi Zero Sugar, continued Mountain Dew strength, and strong momentum in Poppi and Propel.
• Margins expanded on pricing, mix, and productivity actions, including automation, logistics, and trade optimization, and expects to mitigate higher supply chain costs moving forward.
• Management called discussions with Elliott constructive, noting alignment on strategy and shared view that the stock is undervalued.

Briefing.com Analyst Insight

PepsiCo's Q3 results showed resilience, with accelerating revenue and expanding margins despite ongoing volume pressure. Cost actions are gaining traction, and innovation in zero-sugar and functional beverages continues to perform well. Constructive engagement with Elliott and the addition of Walmart CFO Steve Schmitt should further strengthen PepsiCo's focus on efficiency and profitability. Overall, it was a solid quarter, encouraging in the longer-term, but with limited near-term upside as volume and input cost headwinds persist.