PepsiCo (PEP) is taking a cautious view on the next twelve months as it deals with dueling headwinds in the form of tariffs and fierce competition.
“We’re not immune to this [tariffs] — we are less impacted than most of the businesses,” PepsiCo chair and CEO Ramon Laguarta told me Tuesday morning.
Over the weekend, President Trump began to enact tariffs on Mexico, Canada, and China. The tariffs on Mexico and Canada were temporarily delayed on Monday as leaders worked out a near-term compromise.
Shares fell 2.5% in pre-market trading as PepsiCo unveiled a muted growth outlook for 2025 following better than expected fourth quarter earnings.
Added Laguarta, “Obviously we bring a lot of aluminum from Canada, we bring some oats from Canada as well, but majority of our food, potatoes, corn most of our inputs are localized. You know, we will be impacted. But we have enough flexibility, that’s why we’re giving conservative guidance now because we need some flexibility to deal with all this.”
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Net sales: unchanged year over year to $27.8 billion vs. estimates for $28.05 billion
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Frito-Lay North America sales: -2.7% year over year to $7.3 billion vs. estimates for $7.3 billion
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Quaker Foods North America sales: -2.1%% year over year to $874 million vs. estimates for $901.5 million
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North America beverages: unchanged year over year to $7.9 billion vs. estimates for $7.99 billion
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Europe sales: +7.1% year over year to $4.5 billion vs. estimates for $4.46 billion
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Latin America sales: -5.1% year over year to $3.7 billion vs. estimates for $3.86 billion
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Africa/Middle East sales: +3% year over year to $2 billion vs. estimates for $1.96 billion
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Asia Pacific sales: +2% year over year to $1.5 billion vs. estimates for $1.52 billion
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Organic sales growth: +2.1% year over year vs. estimates for +2.27%
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Core EPS: +10.1% year over year to $1.96 vs. estimates for $1.94
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Organic revenue guidance: low-single digit percentage increase vs. estimates for +3.2%
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Core EPS guidance: mid-single digit percentage increase year over year vs. estimates for +4.5%
The company’s 2025 sales and EPS guidance were relatively in line with consensus. The Street may have some concern on the company hitting those targets judging by how the fourth quarter played out.
PepsiCo saw another quarter of pressured top and bottom lines in its two most important segments: Frito Lay North America and North America Beverages.
The dynamics weighing on performance are complex.
For one, PepsiCo continues to see heightened competition in its snacks and beverage categories, while low income consumers are spending cautiously given years of inflation drive price hikes.