Why did reported EPS jump 137% if core EPS only grew 4%?

The prior-year quarter included roughly $1.86 billion of impairment charges on the Rockstar and Be & Cheery brands, which depressed reported EPS to $0.92. Lapping those charges mechanically inflates the reported comparison. Core EPS, which excludes these and other items, is the better measure of underlying performance and rose 4% to $2.20.

Is PepsiCo's underlying growth healthy, given that organic revenue grew only 2.4%?

Organic growth of 2.4% in the quarter is modest, though the mix is encouraging: organic volume growth was strong internationally and in Asia Pacific, and global organic volume is at its best pace since 2022. The weak spot is North American convenient foods, where effective net pricing turned lower. Investors will watch whether volume gains can offset pricing pressure in the U.S.

Did PepsiCo change its full-year 2026 outlook?

No. Management affirmed its guidance, including organic revenue growth of 2% to 4%, core constant currency EPS growth of 4% to 6%, and free cash flow conversion of at least 80%. The company also reiterated an expected FX tailwind of about 1 point and a 1-point contribution from 2025 acquisitions to reported net revenue growth.

Are there margin risks to the outlook?

Yes. Core operating margin contracted 40 bps in the quarter due to higher operating costs, and management indicated it plans to invest in brand restaging, innovation, and affordability initiatives. These investments may pressure margins near term, with productivity savings intended to offset them over time. Investors should monitor whether reinvestment slows margin recovery.

How is PepsiCo's balance sheet and cash flow position?

Year-to-date operating cash flow improved to $2.4 billion from $1.0 billion, helped by lower acquisition spending and changes in working capital. However, receivables grew to $13.5 billion and short-term debt rose to $10.6 billion from $6.9 billion at year-end 2025. Dividends of $3.9 billion year-to-date were covered by operating cash flow, but leverage and refinancing needs bear watching.

PEP 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 9, 2026. Cited figures are marked; the original filing is the authoritative source.

PepsiCo reported second-quarter 2026 results (12 weeks ended June 13, 2026) with net revenue up 6.4% to $24.2 billion^a, driven by 2.4% organic growth, a 2.2-point foreign exchange tailwind, and a 1.8-point net benefit from acquisitions.

Organic volume growth was strong internationally, while North American convenient foods saw lower effective net pricing and declining net revenue. Reported EPS rose 137% to $2.18^b and operating profit rose 125%, but this comparison is flattered by the prior-year impairment charges tied to Rockstar and Be & Cheery. The more meaningful measures show core EPS up 4% to $2.20 and core operating profit up 4%, with core operating margin contracting 40 basis points to 16.8%.

For the first half, net revenue grew 7.3% and organic revenue grew 2.5%, with core EPS up 6% to $3.81^c. Management highlighted that global organic volume is growing at the fastest pace since 2022, citing international strength and portfolio evolution toward portion control, functional, and zero-sugar offerings. Management also flagged planned restaging of certain global brands, affordability investments, and productivity efforts to improve operating leverage, which may weigh on near-term margins.

PepsiCo affirmed its fiscal 2026 guidance: organic revenue growth of 2% to 4%, core constant currency EPS growth of 4% to 6%, free cash flow conversion of at least 80%, and about $8.9 billion^d in shareholder returns. Year-to-date operating cash flow improved to $2.4 billion from $1.0 billion, though working capital absorbed cash and short-term debt rose to $10.6 billion. Investors will likely focus on whether North American pricing pressure eases and whether margin pressure from reinvestment is manageable within the reaffirmed targets.

02—Key points

Key Highlights

Net revenue rose 6.4% to $24.2B in Q2 2026, with organic growth of 2.4%, a 2.2-point FX benefit, and a 1.8-point acquisition benefit.
Reported EPS rose 137% to $2.18, but this is inflated by the prior-year Rockstar and Be & Cheery impairment charges; core EPS grew 4% to $2.20.
Core operating margin contracted 40 bps to 16.8% in Q2, reflecting certain operating cost increases partly offset by productivity savings and net pricing.
North America convenient foods net revenue declined on lower effective net pricing, despite gaining volume share; international segments delivered strong growth.
Year-to-date global organic volume grew at the fastest rate since 2022, led by international markets and portfolio innovation.
FY2026 guidance affirmed: organic revenue growth of 2–4%, core constant currency EPS growth of 4–6%, and FCF conversion of at least 80%.
Year-to-date operating cash flow rose to $2.4B from $1.0B, while short-term debt increased to $10.6B from $6.9B at year-end 2025.

03—Questions

Frequently Asked Questions

Why did reported EPS jump 137% if core EPS only grew 4%?
The prior-year quarter included roughly $1.86 billion of impairment charges on the Rockstar and Be & Cheery brands, which depressed reported EPS to $0.92. Lapping those charges mechanically inflates the reported comparison. Core EPS, which excludes these and other items, is the better measure of underlying performance and rose 4% to $2.20.
Is PepsiCo's underlying growth healthy, given that organic revenue grew only 2.4%?
Organic growth of 2.4% in the quarter is modest, though the mix is encouraging: organic volume growth was strong internationally and in Asia Pacific, and global organic volume is at its best pace since 2022. The weak spot is North American convenient foods, where effective net pricing turned lower. Investors will watch whether volume gains can offset pricing pressure in the U.S.
Did PepsiCo change its full-year 2026 outlook?
No. Management affirmed its guidance, including organic revenue growth of 2% to 4%, core constant currency EPS growth of 4% to 6%, and free cash flow conversion of at least 80%. The company also reiterated an expected FX tailwind of about 1 point and a 1-point contribution from 2025 acquisitions to reported net revenue growth.
Are there margin risks to the outlook?
Yes. Core operating margin contracted 40 bps in the quarter due to higher operating costs, and management indicated it plans to invest in brand restaging, innovation, and affordability initiatives. These investments may pressure margins near term, with productivity savings intended to offset them over time. Investors should monitor whether reinvestment slows margin recovery.
How is PepsiCo's balance sheet and cash flow position?
Year-to-date operating cash flow improved to $2.4 billion from $1.0 billion, helped by lower acquisition spending and changes in working capital. However, receivables grew to $13.5 billion and short-term debt rose to $10.6 billion from $6.9 billion at year-end 2025. Dividends of $3.9 billion year-to-date were covered by operating cash flow, but leverage and refinancing needs bear watching.

04—Continue

← View all 8-K filings