The company is cutting 2024 guidance as North American sales expectations lag

PepsiCo ( PEP ) revised its 2024 sales forecast on Tuesday after its North American and international sales missed Wall Street expectations in the third quarter.

The snack and beverage giant told investors on Tuesday that it now expects to end the year with low-single-digit organic revenue growth, below the 4 percent increase previously expected.

Pepsi shares fell about 1 percent in premarket trading after the release of its quarterly results.

JP Morgan analyst Andrea Teixeira said on Tuesday that she expects the stock to remain “negative to neutral.”

“We believe a reduction in the organic sales growth outlook and reiteration of the profit outlook were widely anticipated as ongoing challenging trends in the North American segments are offset by stronger margin and productivity performance,” it wrote she in a note to clients.

The company reported adjusted third-quarter earnings of $2.31 per share, slightly above the $2.30 expected by analysts. But revenue for the quarter fell short of Wall Street estimates, coming in at $23.3 billion, versus the $23.8 billion expected.

PepsiCo also reiterated expectations for at least 8% growth in earnings per share on a constant basis currency basis.

“Management still expects to grow EPS by at least 8%, impressive given growth of 12% last year. Evidence that the operating model can deliver in a tougher macro,” said Jefferies analyst Kaumil Gajrawala.

For the rest of the year, PepsiCo will “continue to invest in commercial activities and brand support to drive consumer demand,” President and CEO Ramon Laguarta said in the statement.

Laguarta added that Pepsi’s fiscal third-quarter performance was affected by “reduced category performance trends in North America,” the impact of withdrawals from Quaker Foods North America and business disruptions from “rising geopolitical tensions in certain international markets”.

In a phone interview with Yahoo Finance, Laguarta said consumers are “very challenged” and make “a lot of compromises” when it comes to food. These trade-offs affect the snack business the most, Laguarta explained.

All three of PepsiCo’s North American segments fell below expectations, including Frito-Lay, Quaker Foods and PepsiCo Beverages, as it tries to combat consumer pushback from higher prices at the grocery store.

In a statement, the company said it made investments to provide “more value to consumers” and improve “availability and in-store presence,” which led to the improved trend in volume performance. Its snack business, Frito-Lay, saw volume decline 1.5% in the quarter, compared with expectations of 1.81%.

The story continues

The company added that the “cumulative impacts of inflationary pressures and higher borrowing costs over the past few years have continued to weigh on consumer budgets and spending patterns,” resulting in a poor performance of its savory and salty snacks business to at present.

It also said it’s doubling down on what it calls “positive choices” with its healthier alternative brands like SunChips, Stacy’s and PopCorners.

After the end of Q3, the company also announced plans to acquire Mexican-American food and snack brand Siete Foods (“Siete”) for $1.2 billion.

Here’s what PepsiCo reported, compared to what Wall Street expected, according to Bloomberg consensus data:

Adjusted earnings per share: $2.31, versus $2.30 expected

Income: $23.3 billion compared to $23.8 billion

Organic revenue growth: 1.30% compared to 3.00%

North america:

• Frito-Lay: 1.00%, compared to flat

• Quaker Foods: -13.00%, compared to -10.44%

• PepsiCo Beverages: 1.00%, compared to 1.86%

Europe: 6.00% compared to 7.45%

Latin america: 3.00% compared to 4.49%

Africa, Middle East and South Asia: 6.00% compared to 11.40%

Asia Pacific, Australia and Asia Pacific, Australia and New Zealand and China Region: -1.00% compared to 2.92%

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or email them at [email protected].