01—Abstract
Summary
Summary of the 8-K filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.
PepsiCo's first-quarter 2024 results (12 weeks ended March 23, 2024) showed modest top-line and earnings growth, with GAAP net revenue up 2.3% to $18.25 billiona and GAAP diluted EPS of $1.48, up 6% from $1.40.
Organic revenue grew 2.7% and core constant-currency EPS rose 7%, with core EPS of $1.61b. Growth was held back by product recalls at Quaker Foods North America, where net revenue fell 24% and operating results swung to a $49 million loss on a GAAP basis, partly offset by a strong International business, particularly Europe and Latin America. Volume trends improved sequentially, though total organic volume was down about 2%.
Management reaffirmed all 2024 guidance: at least 4% organic revenue growth, at least 8% core constant-currency EPS growth, an approximate 20% core effective tax rate, and roughly $8.2 billionc in cash returns to shareholders. Implied 2024 core EPS is at least $8.15. The company also confirmed a 7% annualized dividend increase beginning with the June 2024 payment, its 52nd consecutive annual increase.
A roughly 1-percentage-point foreign exchange headwind to reported revenue and core EPS growth is still expected. For investors, the key points are the quarter's resilience despite the Quaker recall, the reaffirmed guidance, and the continued dividend growth.
Cash flow from operations was negative $1.04 billiond in the quarter, driven by seasonal working capital outflows and a $3.4 billion reduction in payables and other current liabilities, a typical pattern for the first quarter rather than a sign of deterioration. Shares outstanding were broadly stable at about 1.38 billion.
02—Key points
Key Highlights
- GAAP net revenue rose 2.3% to $18.25B; organic revenue grew 2.7%, with foreign exchange a 0.5-point drag.
- GAAP diluted EPS of $1.48 (up 6%); core EPS of $1.61 (core constant-currency EPS up 7%).
- Quaker Foods North America was the main drag: net revenue fell 24% and GAAP operating profit was a $49M loss, driven by the voluntary bar and cereal recall ($167M pre-tax product recall impact).
- Europe operating profit more than tripled on a GAAP basis (+184%), and Latin America net revenue rose 16% (organic +8%), highlighting strength in International.
- 2024 guidance reaffirmed: at least 4% organic revenue growth, at least 8% core constant-currency EPS growth, implied core EPS of at least $8.15.
- Quarterly dividend increase of 7% annualized to start with the June 2024 payment, the 52nd consecutive annual increase.
- Operating cash flow was negative $1.04B in the quarter, reflecting seasonal payables outflows; cash and equivalents fell to $8.05B from $9.71B.
03—Questions
Frequently Asked Questions
Did PepsiCo meet expectations for the first quarter of 2024?
The filing does not include consensus estimates, so it cannot be determined from this document alone. On its own terms, PepsiCo reported year-over-year growth in net revenue, operating margin and EPS, and said volume trends improved sequentially. Core EPS of $1.61 rose 7% on a constant-currency basis, despite the Quaker recall and a tough prior-year revenue comparison.
How much did the Quaker Foods recall affect results?
The recall was the largest single item affecting comparability in the quarter. It produced a $167 million pre-tax product recall impact, about $0.09 per diluted share after tax. Quaker Foods North America net revenue fell 24%, and its GAAP operating profit was a $49 million loss, compared with $188 million income a year earlier. Excluding the recall, core operating profit for the division was $122 million.
Is PepsiCo's dividend still growing?
Yes. PepsiCo said a 7% annualized dividend increase will begin with the June 2024 payment. This would be the 52nd consecutive annual increase. Dividends paid in the quarter totaled $1.77 billion, up from $1.61 billion a year earlier.
Has PepsiCo changed its 2024 outlook?
No. PepsiCo reaffirmed its 2024 guidance, which includes at least 4% organic revenue growth, at least 8% core constant-currency EPS growth, a core tax rate of about 20%, and about $8.2 billion in total cash returns to shareholders. It still expects an approximate 1-point foreign exchange headwind to reported revenue and core EPS growth.
Why was operating cash flow negative in the quarter?
Operating cash flow is seasonally weak in the first quarter. In this quarter, net cash used for operating activities was $1.04 billion. The main driver was a $3.41 billion decrease in accounts payable and other current liabilities, partly offset by net income of $2.05 billion and non-cash items such as depreciation and amortization of $641 million. Pension contributions of $218 million also weighed on cash flow. The company funded the gap with net borrowings, and cash and equivalents still totaled $8.05 billion at quarter-end.
04—Continue