PepsiCo shares edge higher after Q3 beat, profit outlook cut

On Thursday, PepsiCo shares experienced a slight uptick in early trading following the company's release of third-quarter earnings and revenue that surpassed Wall Street's expectations. Meanwhile, PepsiCo simultaneously adjusted its full-year profit outlook downward.

Core earnings per share amounted to $2.34, exceeding the anticipated $2.30 from analysts. Net revenue exhibited a 5.6% increase, reaching $25.27 billion, surpassing the consensus estimate of $24.97 billion. Organic sales growth (OSG) was found to be 3.1%, outpacing the expected figure, driven by volume gains in both beverages and convenient foods.

Core operating profit rose by 3%, amounting to $4.28 billion, although core operating margin (OM) experienced a 35 basis point decline to 16.9%. PepsiCo attributed a 4-percentage-point benefit from tariff refunds towards core operating profit, which was partially offset by higher operating costs and increased advertising and marketing expenditures.

According to analysts from Citi, PepsiCo's performance exceeded expectations in terms of Q3 organic sales growth and gross margin, but fell short of consensus when considering core operating margin. A $0.06 EPS benefit was attributed to lower interest and tax expenses. The company anticipates a negative stock reaction in response to the revised 2026 EPS guidance, which may raise concerns regarding the 2027 EPS outlook.

Citi analysts further stated that PepsiCo now expects core constant-currency EPS growth of 1% to 2% for the year, a reduction from the previously forecasted 4% to 6% range. Additionally, core EPS growth expectations were revised downward to 2.5% to 3.5%, from the low end of the previous 5% to 7% range.

PepsiCo reduced its forecast for organic revenue growth to approximately 3%, from a range of 2% to 4%, in contrast to the analyst estimate of 2.5%. The company increased its net revenue growth forecast to about 6%, from the previous range of 4% to 6%, driven by currency fluctuations and acquisitions. However, PepsiCo maintained its planned shareholder returns at $8.9 billion.

North America emerged as the weak point in the company's performance. While convenient foods revenue trends improved from the prior quarter, with savory snack volume growth and market share gains, it was countered by lower pricing. Beverages revenue grew by 5%, primarily due to acquisitions made in 2025. Internationally, PepsiCo's businesses demonstrated robust growth across all segments.