PepsiCo Analyst Reacts To Beat-And-Raise Quarter: 'Strengthened Position And Pricing Power'

PepsiCo, Inc. PEP shares traded higher by 3.7% on Wednesday after the soda and snack giant reported better-than-expected third-quarter sales and earnings and raised its full-year guidance.

The Numbers: PepsiCo reported 9% sales growth in the third quarter and guided for full-year organic revenue growth of 12%, up from previous guidance of 10%. The company also expects core constant currency earnings per share growth of 10% this year.

Related Link: PepsiCo Ends Pepsi, 7UP production In Russia: Reuters

PepsiCo reported 4% North American beverage revenue growth, 15% North American Quaker Food revenue growth and 20% North American Frito-Lay snack revenue growth in the quarter. PepsiCo has also been expanding its focus on energy drinks. The company took a $550 million stake in Celsius Holdings in August and recently launched Gatorade FastTwitch.

PepsiCo's strong quarter was particularly impressive given the foreign exchange headwinds its international business has been facing thanks to the strong U.S. dollar. So far, PepsiCo has successfully been able to offset slumping sales volumes and pass rising costs on to customers by raising prices.

Related Link: PepsiCo Boosts Annual Guidance Following Solid Q3 Beat

Analyst Take: Following the earnings report, Bank of America analyst Bryan Spillane said PepsiCo's clean beat-and-raise quarter demonstrates the company's strong momentum in a difficult inflationary environment.

"We believe PEP’s premium to non-alcoholic beverage peer average of 22.9x is warranted by their strengthened position and pricing power," Spillane said.

Bank of America has a Buy rating and $190 price target for PepsiCo.

Benzinga's Take: PepsiCo's strong quarter bodes well for competitor Coca-Cola Co KO, which is expected to report on Oct. 25. Both PepsiCo and Coca-Cola shares have held up well in a difficult market so far in 2022, down just 3.2% and 6%, respectively.