PepsiCo still has 'a lot of wood to chop': Q2 was 'not good'
RBC Capital Markets managing director Nik Modi joins Market Catalysts to examine the earnings print in the context of the challenging landscape the wider food and beverage industry faces.
To watch more expert insights and analysis on the latest market action, check out more Market Catalysts here.
PepsiCo rising after topping second-quarter estimates and reiterating its full-year outlook. The maker of Lays and Gatorade citing strong international growth for the results. Joining me now is Nick Modi, RBC Capital Markets managing director. Nick, good to see you here. You got a sector perform on this one, price target of $146. Um, when you look at the volumes here, kind of, kind of lackluster, what do you think is going on with Pepsi? What is your sort of biggest takeaway?
Yeah, I mean, look, this has been a general theme that's been going across the entire consumer goods space. Um, grocery inflation has outpaced wage growth, going back to when we got out of the pandemic. And I think that's made groceries literally less affordable in the eyes of the consumer. And so, in those circumstances, a consumer looks for value. Now, when you think about what's happened to a bag of potato chips or Doritos or any other salty snack, uh, for that matter, the prices have gone up quite a bit. Um, or there's product that's come out of the package. And, I think consumers have noticed, and so they're making choices. They're either going to private label, or they're maybe even going to protein forward snacks, just given uh, the rise of the interest in protein as we have an aging population, but also because of GLP1s. So I think all of that is contributing to Pepsi's volume weakness. Um, looks like they're starting to reinvest back into promotions and drive some, some improved volume. Uh, so sequentially it got better from the first quarter, but we still think they have a lot of wood to chop to, to get their, uh, business back to growth.
Does the stock price reaction today, that 6% boost, does that make sense to you?
Listen, I, the expectations were incredibly low coming into the quarter. Um, and, and that's a function of many other food companies having very disappointing results. General Mills, Smuckers, uh, uh, Conagra, for example. Um, so I think what's happening today is just a reaction to it being not as bad as everyone thought. But let's not kid ourselves, these were not good results uh, in, in an absolute sense. Um, and so we feel very comfortable with our sector perform at this point.
And Nick, um, we've seen a lot of changes in the food industry in terms of, of remaking a various conglomerates, right? You know, sort of splitting up, spinning off brands, etc. Is, is that what Pepsi needs to do also?
I don't think Pepsi necessarily needs to do that. I mean, I, I think a lot of Pepsi's issues are macro driven. Uh, I think there's some probably some strategic missteps they made around innovation. Um, and I think they need to expand their product portfolio to include other snacking substrates like cauliflower and edamame, uh, but also be more protein forward. So, I don't really think they need to have any massive corporate action um, like you're seeing with some of the other companies in the sector right now.
Well, and you mentioned the macro. Um, you know, is it just tough to be in the snack business right now because of those trends, or is it just a matter of they're not leaning into some of the micro trends that, that you alluded to, the sort of quote-unquote healthier snacks or the protein forward snacks?
I think it's a little bit of both, right? It's hard to quantify what structural versus cyclical, but I would say the cyclical element is very high uh, because it's not just Pepsi that's struggling. Almost all of my companies uh, across the entire consumer goods landscape are feeling volume pressure right now. Uh, so that's why I believe that this is a, a very big cyclical issue. Um, and so as we start getting into a better, more normalized consumer environment, whenever that comes, uh, I, I certainly think you'll see some volume improvement.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
26 minutes ago
- Yahoo
Hologic (HOLX) Reports Q2: Everything You Need To Know Ahead Of Earnings
Medical technology company Hologic (NASDAQ:HOLX) will be reporting earnings this Wednesday afternoon. Here's what investors should know. Hologic met analysts' revenue expectations last quarter, reporting revenues of $1.01 billion, down 1.2% year on year. It was a slower quarter for the company, with a slight miss of analysts' full-year EPS guidance estimates and full-year revenue guidance meeting analysts' expectations. Is Hologic a buy or sell going into earnings? Read our full analysis here, it's free. This quarter, analysts are expecting Hologic's revenue to be flat year on year at $1.01 billion, slowing from the 2.7% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $1.05 per share. The majority of analysts covering the company have reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. Hologic has only missed Wall Street's revenue estimates once over the last two years, exceeding top-line expectations by 0.9% on average. Looking at Hologic's peers in the healthcare equipment and supplies segment, some have already reported their Q2 results, giving us a hint as to what we can expect. Boston Scientific delivered year-on-year revenue growth of 22.8%, beating analysts' expectations by 3.4%, and Intuitive Surgical reported revenues up 21.4%, topping estimates by 3.7%. Boston Scientific traded up 2.9% following the results while Intuitive Surgical was down 1.9%. Read our full analysis of Boston Scientific's results here and Intuitive Surgical's results here. Investors in the healthcare equipment and supplies segment have had steady hands going into earnings, with share prices flat over the last month. Hologic is up 2.8% during the same time and is heading into earnings with an average analyst price target of $69.93 (compared to the current share price of $66.99). Unless you've been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story. StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here. Sign in to access your portfolio
Yahoo
26 minutes ago
- Yahoo
CONMED (CNMD) Q2 Earnings: What To Expect
Medical tech company CONMED (NYSE:CNMD) will be announcing earnings results this Wednesday after market close. Here's what to look for. CONMED beat analysts' revenue expectations by 2.6% last quarter, reporting revenues of $321.3 million, up 2.9% year on year. It was a very strong quarter for the company, with a solid beat of analysts' full-year EPS guidance estimates and an impressive beat of analysts' EPS estimates. Is CONMED a buy or sell going into earnings? Read our full analysis here, it's free. This quarter, analysts are expecting CONMED's revenue to grow 1.9% year on year to $338.3 million, slowing from the 4.5% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $1.12 per share. The majority of analysts covering the company have reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. CONMED has missed Wall Street's revenue estimates three times over the last two years. Looking at CONMED's peers in the healthcare equipment and supplies segment, some have already reported their Q2 results, giving us a hint as to what we can expect. Boston Scientific delivered year-on-year revenue growth of 22.8%, beating analysts' expectations by 3.4%, and Intuitive Surgical reported revenues up 21.4%, topping estimates by 3.7%. Boston Scientific traded up 2.9% following the results while Intuitive Surgical was down 1.9%. Read our full analysis of Boston Scientific's results here and Intuitive Surgical's results here. Investors in the healthcare equipment and supplies segment have had steady hands going into earnings, with share prices flat over the last month. CONMED is down 4% during the same time and is heading into earnings with an average analyst price target of $66.60 (compared to the current share price of $50.02). Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link. StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
26 minutes ago
- Yahoo
Kraft Heinz (KHC) Reports Q2: Everything You Need To Know Ahead Of Earnings
Packaged foods company Kraft Heinz (NASDAQ:KHC) will be reporting results this Wednesday before market open. Here's what investors should know. Kraft Heinz met analysts' revenue expectations last quarter, reporting revenues of $6.00 billion, down 6.4% year on year. It was a mixed quarter for the company, with a narrow beat of analysts' EBITDA estimates but full-year EPS guidance missing analysts' expectations. Is Kraft Heinz a buy or sell going into earnings? Read our full analysis here, it's free. This quarter, analysts are expecting Kraft Heinz's revenue to decline 3.1% year on year to $6.27 billion, in line with the 3.6% decrease it recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.64 per share. Heading into earnings, analysts covering the company have grown increasingly bearish with revenue estimates seeing 4 downward revisions over the last 30 days (we track 10 analysts). Looking at Kraft Heinz's peers in the shelf-stable food segment, some have already reported their Q2 results, giving us a hint as to what we can expect. Lamb Weston delivered year-on-year revenue growth of 4%, beating analysts' expectations by 5.7%, and McCormick reported flat revenue, in line with consensus estimates. Lamb Weston traded up 19.3% following the results while McCormick was also up 3.6%. Read our full analysis of Lamb Weston's results here and McCormick's results here. There has been positive sentiment among investors in the shelf-stable food segment, with share prices up 3.8% on average over the last month. Kraft Heinz is up 9.3% during the same time and is heading into earnings with an average analyst price target of $30.18 (compared to the current share price of $28.22). Unless you've been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story. StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
