PepsiCo, Inc. (PEP) is doing something you don't see every day in this inflationary world: actually cutting prices. After customers made it pretty clear they weren't happy about paying premium prices for their Doritos fix, the snack and beverage giant is rolling back prices on popular brands like Lay's and Flamin' Hot Cheetos by up to 15%.
The announcement came alongside solid fourth-quarter results that showed strength across North America and international markets. The company reported adjusted earnings per share of $2.26, edging past the analyst consensus of $2.24. Revenue hit $29.34 billion, climbing 5.6% year over year and beating Wall Street's expectations of $28.972 billion.
"PepsiCo's fourth quarter results reflected a sequential acceleration in reported and organic revenue growth, with improvements in both the North America and International businesses," said Chairman and CEO Ramon Laguarta.
But here's the thing: beating earnings estimates doesn't mean much if customers are walking past your products in the grocery aisle. According to The Wall Street Journal, PepsiCo faced a wave of consumer complaints about pricing pushing shoppers away from brands they've loved for years. Rachel Ferdinando, CEO of PepsiCo's U.S. food business, put it simply: "Consumers told us they need more value."
Breaking Down the Numbers
Looking at segment performance, PepsiCo Foods North America saw revenue increase 1.5%, though operating profit actually declined 6% due to higher operating costs. The beverage side performed better, with PepsiCo Beverages North America gaining 4%.
International markets showed particularly strong momentum. The International Beverages Franchise grew 3.5% while operating profit surged 116%. Europe, the Middle East, and Africa proved especially robust, with revenues jumping 12% and operating profit climbing 72%.
The Financial Picture
Gross profit expanded to $15.620 billion from $14.603 billion a year earlier, while gross margin improved to 53.2% from 52.6%. Operating profit more than doubled to $3.557 billion compared to $2.250 billion in the prior-year quarter.
PepsiCo ended the quarter with $9.159 billion in cash and equivalents. The company also announced it's raising its annualized dividend by 4% starting with the June 2026 payment, marking the 54th consecutive year of dividend increases. Additionally, management authorized a new $10 billion share repurchase program running through February 28, 2030.
Looking Ahead
For fiscal 2026, Laguarta outlined a growth strategy centered on brand restaging, expanded innovation in emerging and functional categories, and sharper value offerings to address consumer affordability concerns. He emphasized that record productivity savings should fund these growth investments while supporting improved North America performance and keeping international business resilient.
The company reaffirmed its fiscal 2026 guidance from December, forecasting adjusted earnings of $8.55 to $8.71 per share, matching Wall Street expectations of $8.55.
PepsiCo shares traded down 0.88% at $153.84 during premarket trading on Tuesday.
