PepsiCo now expects 2026 sales to grow about twice as fast as core earnings
PepsiCo roughly halved its fiscal 2026 core earnings growth forecast, blaming sluggish North American demand and rising input costs. Chief executive Ramon Laguarta plans more structural cost cuts, but he has pledged the savings to growth investment and to offsetting input inflation.
The Investor · Invest desk
What happened
- Third-quarter adjusted earnings of $2.34 a share topped the $2.29 consensus, on revenue up 5.6% to $25.27 billion against about $25 billion expected.
- PepsiCo now expects fiscal 2026 net revenue at the high end of its range, up about 6%, according to Yahoo Finance.
- Price cuts earlier this year drove a 280 basis point decline in PepsiCo's North America core operating margin.
- The company reiterated plans to raise prices by 15% this year to offset higher input costs, Yahoo Finance reported.
Why it matters
- What it limits constraint Organic revenue is guided at about 3%, the middle of the old 2% to 4% range, so roughly half of the 6% net revenue figure is non-organic and the move to the top of the range is no evidence that demand has improved.
- What doesn't add up contradiction The two reported core EPS ranges sit 1 to 1.5 points apart, as the old ones did by about a point; if currency explains the gap, as CNA's currency-adjusted label implies, underlying core profit is growing only 1% to 2%.
- Who's exposed exposure If shoppers CNA describes as cautious amid rising gas prices buy less at prices 15% higher, North American volume pays for the margin repair.
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On Yahoo Finance's figures, net revenue up about 6% against core EPS growth of 2.5% to 3% means sales grow about 2.2 times as fast as earnings at the midpoint [4][18][12]. CNA's pair, organic revenue up about 3% against currency-adjusted core EPS up 1% to 2%, gives a ratio of 2 [8][9][13].
The quarter before the cut was a thin beat. Adjusted earnings came in $0.05 a share, or about 2%, above consensus, and revenue roughly $270 million above it [15]. The quarter also included $178 million of tariff refunds [11]. Yahoo Finance did not report whether those refunds are counted in the adjusted figure. The shares were little changed before the open by Yahoo Finance's account, and up about 1% by CNA's [16][17].
I think a share price that holds through a forecast cut by more than half at the midpoint [21] is a bet on North America, the region the company itself singles out. "We continue to operate with a high sense of urgency to sustainably improve the company's financial and marketplace performance (most notably in North America)," PepsiCo chief executive Ramon Laguarta said [7]. CNA attributed the cut to sluggish demand there for snacks and beverages, and to rising input costs [3].
The cost programme already has a stated use. "Additional structural cost reduction actions are being identified and will be implemented in the coming months to help fund investments that aim to accelerate organic revenue growth and mitigate the impacts of rising input cost inflation," Laguarta said [5]. Margin is not among the named uses. On that wording, the 280 basis points of North American margin lost to this year's price cuts [6] has to come back through the 15% price increase [19].
Three outcomes are open. If input inflation eases and the price increase sticks, part of the 280 basis points returns and EPS growth could beat the new range. In the second case, volumes fall at the higher prices and the savings go to defending market share. The third is the plan as written: the savings arrive, get spent as Laguarta described, and core EPS keeps growing at about half the rate of sales [12]. I think the third is the base case, because it is the one the chief executive has put in writing. The first is the counter-thesis, and it depends on input costs falling. The view is wrong if North America's core operating margin recovers a large share of the 280 basis points within two quarters while organic growth holds near 3% [8].
What to watch
- Details of the structural cost reductions Laguarta said will be implemented in the coming months, including whether any share of the savings is kept for margin.
- Results from General Mills, McCormick and Conagra Brands, which CNA groups with PepsiCo under the same input-cost and demand pressure.
- PepsiCo's next guidance update, and whether the gap between the reported and currency-adjusted core EPS ranges stays near a point.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
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- Evidence72
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- Incentives55
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- [1]
PepsiCo's third-quarter revenue grew 5.6% year over year to $25.27 billion, just beating Wall Street expectations of roughly $25 billion.
- [2]
PepsiCo's third-quarter adjusted earnings were $2.34 a share, slightly above the $2.29 expected per Bloomberg consensus data.
- [3]
PepsiCo said it would pursue additional cost cuts after lowering its annual core profit forecast due to sluggish demand for its snacks and beverages in North America and rising input costs.
- [4]
For fiscal 2026 PepsiCo now expects net revenue at the high end of its range, up approximately 6%.
- [5]
"Additional structural cost reduction actions are being identified and will be implemented in the coming months to help fund investments that aim to accelerate organic revenue growth and mitigate the impacts of rising input cost inflation," Laguarta said.
- [6]
Earlier this year PepsiCo lowered prices, which led its North America core operating margin to decline by 280 basis points.
- [7]
"We continue to operate with a high sense of urgency to sustainably improve the company's financial and marketplace performance (most notably in North America)," PepsiCo CEO Ramon Laguarta said in prepared remarks.
- [8]
PepsiCo expects fiscal 2026 organic revenue to be up about 3%, compared with a prior forecast of between 2% and 4%.
- [9]
PepsiCo expects fiscal 2026 core EPS, adjusted for currency fluctuations, to rise 1% to 2%, compared with a prior forecast of the low end of a 4% to 6% rise.
- [10]
Consumer packaged goods makers such as PepsiCo, General Mills, McCormick and Conagra Brands face surging input costs straining margins, while cautious spending amid rising gas prices is hurting demand.
- [11]
Tariff refunds amounted to $178 million in PepsiCo's third quarter.
- [12]
On Yahoo Finance's figures, 2026 net revenue growth of about 6% is about 2.2 times the 2.75% midpoint of core EPS growth guidance.
- [13]
On CNA's figures, organic revenue growth of about 3% is 2 times the 1.5% midpoint of currency-adjusted core EPS growth guidance.
- [14]
About 3 points of the roughly 6% net revenue growth outlook come from outside organic revenue growth.
- [15]
The third-quarter adjusted EPS beat was $0.05 a share, about 2.2% above consensus, and revenue beat expectations by roughly $270 million.
- [16]
PepsiCo stock was little changed in premarket trading following the results.
- [17]
PepsiCo shares were up about 1% in premarket trading.
- [18]
PepsiCo lowered its forecast for fiscal 2026 core EPS growth to 2.5%-3%, down from 5%-7%.
- [19]
PepsiCo reiterated plans to raise prices this year by 15% to offset higher input costs.
- [20]
The two reported new core EPS growth ranges differ by 1 to 1.5 points (2.5%-3% vs 1%-2%), and the prior ranges differed by about 1 point (5%-7% vs 4%-6%).
- [21]
Under either publisher's measure, PepsiCo cut its 2026 core EPS growth forecast by more than half at the midpoint: from 6% to 2.75% on Yahoo Finance's ranges, or from about 4% to 1.5% on CNA's currency-adjusted ranges.
Sources
5 independent publishers whose own reporting we read for this story.
- abcnews.comPepsiCo sees strong overseas demand but a lackluster North American performance in the third quarter
1 article · October 8, 2026
- channelnewsasia.comPepsiCo to cut costs as weak N.America business hurts annual core profit forecast
4 articles · October 8, 2026
- finance.yahoo.comPepsiCo beats earnings expectations, lowers guidance as it aims to stabilize North America business
1 article · October 8, 2026
- qz.comPepsiCo cuts its full-year profit forecast to 2.5%-3.5% growth as North America drags
1 article · October 8, 2026
- seekingalpha.comPepsiCo, Inc. (PEP) Q3 2026 Earnings Call Transcript
1 article · October 8, 2026
Topics and entities
Topics
- Input Cost Inflation
- Shareholder Activism
- Consumer packaged goods
- Earnings Guidance
Entities
- PepsiCo
- Elliott Investment Management