Problems at Quaker Foods overshadowed an otherwise solid quarter.
Shares of Pepsico (PEP -2.97%), the global food and beverage giant, finished the day lower as its first-quarter beat was counteracted by a recall in its Quaker Foods business and a drop in U.S. sales.
As a result, the stock closed today’s session down 3%.
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Pepsi falls short of high expectations
Pepsico has historically been a slow-growth company, but it has earned a high-earnings multiple for its competitive advantages and recession-proof business.
However, investors seem to think the stock’s valuation is a bit stretched currently, as a beat on the top and bottom lines wasn’t enough to deserve a higher share price.
Revenue in the quarter rose 2.3% to $18.3 billion, edging out the consensus at $18,07 billion, while organic revenue increased 2.7%. Revenue was up in all of its segments except Quaker Foods, which fell 24% due to product recalls and difficult comparisons with the quarter a year ago. Those recalls also led to a generally accepted accounting principles (GAAP) operating loss in the period, though overall core constant-currency earnings per share were up 7% to $1.61, driven by strong performance in international markets.
That result beat the analyst consensus at $1.52.
CEO Ramon Laguarta said, “During the first quarter, our businesses remained agile and performed well, with a strong performance from our international business.
Pepsi sees stronger growth ahead
For the full year, management maintained its guidance, calling for at least 4% organic revenue and at least an 8% increase in core constant currency EPS to at least $8.15.
Given that forecast, there’s no reason to panic on today’s pullback. Investors just seem to believe the stock could use a breather for valuation reasons even though the overall growth story remains intact.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
