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PEPSICO INC 8-K Report, Financial Results (Feb 9, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed February 9, 2024
Period End
February 9, 2024
Security
PEP
In the record · 2016–202610-K1110-Q338-K145

PEP filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 145 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jun ’16Jun ’16
  2. Impairment8-K · Feb ’19Feb ’19
  3. Leadership change8-K · Aug ’21Aug ’21
  4. Leadership change8-K · Sep ’26Sep ’26

01—Abstract

Summary

Summary of the 8-K filed February 9, 2024. Cited figures are marked; the original filing is the authoritative source.

PepsiCo reported fourth-quarter and full-year 2023 results for the 16 and 52 weeks ended December 30, 2023.

Full-year GAAP net revenue rose 5.9% to $91.5 billiona, and GAAP EPS grew 2% to $6.56. Organic revenue growth was a stronger 9.5%, driven by effective net pricing of 13 points and a 3-point organic volume decline. Core constant-currency EPS rose 14% to $7.62 (core EPS of $7.62 versus $6.79 in 2022, with the constant-currency measure excluding FX).

GAAP results were pressured by roughly $1.2 billionb of impairment and other charges, most notably a $321 million impairment on the Tropicana Brands Group investment and continued SodaStream-related impairments, plus product recall costs tied to the Quaker Foods North America bar and cereal recall. Prior-year GAAP results also included a $3.0 billion juice-transaction gain, which makes reported beverage and operating profit comparisons look sharply worse than underlying performance. Fourth-quarter 2023 results were mixed.

GAAP net revenue fell 0.5% and GAAP EPS jumped to $0.94c from $0.37, but core EPS rose to $1.78 from $1.67, and organic revenue grew 4.5%. Quaker's quarter was hit hard by the recall, with operating profit down 79% on a reported basis and organic revenue down 10%. Management noted that the 53rd reporting week in 2022 distorts year-over-year comparisons, and that category growth is normalizing as consumer behavior returns to pre-pandemic patterns while inflation moderates.

For 2024, PepsiCo guided to at least 4% organic revenue growth and at least 8% core constant-currency EPS growth, implying core EPS of at least $8.15d. The company also expects a roughly 1-point FX headwind, a 20% core tax rate, and about $8.2 billion in total cash returns to shareholders, including $7.2 billion in dividends and $1.0 billion in buybacks.

The annualized dividend rises 7% to $5.42 per share, marking the 52nd consecutive annual increase. Investors should weigh the strong underlying pricing and profit momentum against the ongoing recall drag on Quaker and the guidance that assumes pricing realization moderates.

02—Key points

Key Highlights

  1. Full-year 2023 GAAP net revenue rose 5.9% to $91.5 billion; organic revenue grew 9.5%, with effective net pricing contributing 13 points.
  2. Full-year GAAP EPS rose 2% to $6.56, while core constant-currency EPS grew 14% to $7.62, reflecting pricing and productivity gains.
  3. Q4 2023 GAAP EPS was $0.94 versus $0.37 a year earlier, but core EPS of $1.78 rose 7% from $1.67 on a comparable basis, with organic revenue up 4.5%.
  4. Quaker Foods North America was hurt by the voluntary bar and cereal recall; Q4 operating profit fell 79% on a reported basis and full-year operating profit fell 19%.
  5. PepsiCo recorded $321 million of impairment charges on its Tropicana Brands Group investment in 2023, weighing on PepsiCo Beverages North America operating profit (down 52% reported).
  6. 2024 guidance calls for at least 4% organic revenue growth and at least 8% core constant-currency EPS growth, implying core EPS of at least $8.15.
  7. Annualized dividend increases 7% to $5.42 per share (52nd consecutive annual increase), and the company plans about $1.0 billion in share repurchases, for total 2024 cash returns of about $8.2 billion.

03—Questions

Frequently Asked Questions

  1. Why does GAAP EPS growth look so modest compared with core EPS growth?

    The 2022 GAAP results included a $3.0 billion gain from the sale of Tropicana, Naked and other juice brands, which inflated the prior-year base. Meanwhile, 2023 GAAP results absorbed about $1.2 billion of impairment and other charges and recall-related costs. Core EPS strips out these items, which is why GAAP EPS grew only 2% while core constant-currency EPS grew 14%.

  2. How much of the revenue growth came from pricing versus volume?

    For full-year 2023, effective net pricing contributed about 13 points of organic revenue growth, while organic volume declined about 3 points. Pricing has therefore been the primary growth driver, and management expects realization to moderate as inflation abates in 2024.

  3. What is the impact of the Quaker recall on future results?

    Management said Quaker's unit volume, net revenue and operating profit will continue to be negatively affected in 2024 by lower sales and additional recall-related charges. Quaker's full-year 2023 operating profit fell 19%, and its Q4 operating profit fell 79%, so the recovery timeline remains a key watch item.

  4. Is the 2024 guidance conservative, and what could cause it to miss?

    The guidance assumes pricing realization moderates and that inflationary pressures abate, while PepsiCo plans to step up investment in brands, innovation and productivity-driven cost actions. The guidance also excludes FX and commodity mark-to-market effects, and an expected 1-point FX headwind is already included. Risks include weaker consumer demand, sustained input cost inflation, further impairments and continued recall-related disruption.

04—Continue

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