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Investing.com - PepsiCo (NASDAQ:PEP) has reported core profit for the second quarter that topped estimates, as the food and beverage group said its international unit showed signs of momentum despite a "challenging" operating environment.
Consumer staples companies like Pepsi have been grappling with a host of headwinds, including worries on Wall Street that sweeping U.S. tariffs will lead many shoppers to rein in spending and seek out cheaper options at the supermarket.
Concerns have also swirled around potential burdens from American health regulators, as well as changing consumer habits, driven by the possibility that the emergence of new obesity drugs could curb appetites for the snacks crucial to Pepsi’s results.
In a statement, CEO Ramon Laguarta said Pepsi’s North America businesses have pushed for more product innovation and cost savings as they attempt to improve their "execution and competitiveness" in the face of these trends. Organic revenues at the region’s foods unit slipped by 2%, while beverage division sales edged up by 1%.
But Pepsi’s international beverages franchise posted a 5% sales increase, while revenues in Latin America and Europe, Middle East and Africa moved up by 6% and 7%, respectively.
Group-wide net revenue in the 12 weeks ended on June 14 also edged up by 1% versus a year ago to $22.73 billion, beating projections of $22.32 billion.
“We’re encouraged by the acceleration in our net revenue growth versus the previous quarter with our businesses effectively navigating through a challenging environment," Laguarta said.
Core earnings per share at the firm behind brands like Lay’s potato chips and Mountain Dew soft drinks came in at $2.12, down from $2.28 in the previous year but above Bloomberg consensus expectations.
Meanwhile, Pepsi backed its outlook for a low-single-digit uptick in annual organic revenue and core constant-currency per-share income "approximately even with the prior year."
It slashed its expectations for a foreign-exchange related hit, saying it now anticipates a headwind of around 1.5 percentage points to annual net revenues and core earnings per share. Pepsi had previously guided for a negative impact of about 3 percentage points.
Analysts at Evercore ISI flagged that Pepsi expects to see incremental supply chain costs, "primarily related to the sourcing of certain global inputs and ingredients and related tariff impacts," but the firm says it is "implementing mitigation strategies to partially reduce" these expenses.
Shares of Pepsi were higher by more than 6% in early U.S. trading on Thursday.