Pepsi Stock Rises on Strong Earnings Beat

Pepsi beat earnings and revenue forecasts during Q3.

On Thursday, Pepsi released its third-quarter earnings report and the results were just what investors were hoping to see. The company saw gains across the board and beat its revenue and earnings forecasts substantially. 

Best of all, management expects this momentum to carry into the fourth quarter. Here is an overview of Pepsi’s third-quarter results:

  • Revenue: $17.19 billion instead of $16.93 billion forecasted
  • Adjusted earnings: $1.56 per share instead of $1.50 forecasted

3 Takeaways from Pepsi’s Q3 earnings

Investors reacted positively to the latest earnings report and Pepsi’s shares rose 3% on Thursday. Listed below are the three biggest takeaways from the earnings report.

1. Revenue grew but so did the company’s spending

Most of Pepsi’s third-quarter growth can be attributed to an uptick in spending on advertising. Advertising costs are always a bit of a trade-off because while Pepsi’s revenue jumped, its net income also fell slightly.

According to Pepsi CFO Hugh Johnston, Pepsi’s ad spending is up 12% this year. But it certainly seems to be money well spent since the company saw its organic revenue grow 4.3% during the most recent quarter.   

2. The company saw growth across its various brands

During the third quarter, Pepsi saw strong growth across several of its brands. The company’s Frito Lays brand, which includes Cheetos and Doritos, grew by 5.5%. And Pepsi saw its healthier options, like Bare and Off the Eaten Path, increase as well. 

Pepsi’s beverage business saw strong growth as well. Gatorade and Gatorade Zero saw substantial gains during the most recent quarter. And the company’s flavored water brand Bubly continues to take market share from La Croix. 

3. Management expects to hit its full-year growth target

Going forward, Pepsi reiterated its guidance for the fourth quarter. Pepsi CEO Ramon Laguarta said the company expects it will meet its full-year target of 4% organic revenue growth. 

Final thoughts

2019 has been an excellent year for Pepsi and the shares are currently up more than 30%. And the fact that the company is experiencing strong organic sales growth should be very attractive to potential investors. It demonstrates that the brand still has strong consumer demand and is adapting to the changing marketplace.