PepsiCo Beats Earnings in Q3 Despite Struggling Sales in North America

PepsiCo, Inc. (NYSE:PEP) released its Q3 results on Wednesday which had it posting an earnings per share (EPS) $1.48, above expectations of $1.43. However, sales of $16.24 billion came under the estimated $16.31 billion that was forecasted by analysts. Foreign exchange had a negative impact on the revenue and EPS of approximately 1%. Despite this, net revenue was still able to achieve a year-over-year growth of over 1.3%.

A look at the different segments showed that the company’s North American Beverages segment which contributed one-third of sales, was down 3% year-over-year. In contrast, the Europe Sub-Saharan Africa segment saw sales rise by 8% and Latin America increased by 6%. Frito-Lay North America was up 3% while Asia, Middle East and North Africa sales saw the poorest performance with sales down 4% from last year.

In terms of operating profit, the trend was similar with North American Beverages being the only segment in the negative, down 10%. Latin America and Europe Sub-Saharan were the only double-digit increases at 14% and 12%, respectively.

The company was able to achieve efficiencies with cutting selling, general and administrative expenses down by 1%, but otherwise there were not significant changes to other operational expenses.

The concern for the company is that its core segment is struggling the most, suggesting the trend for healthier products might be have a significant impact on PepsiCo’s future sales and profitability. It is clear that the company will need to rely on growth beyond its domestic borders if it will be able to continue to grow sales and increase its bottom line.