PepsiCo Inc (NASDAQ:PEP, ETR:PEP) shares fell 2.4% premarket as it tweaked guidance after seeing "subdued" North America snack demand after Salmonella concerns and a fall in drink volumes.
However, earnings for the second quarter were better than expected.
A Quaker Oats factory was shut in April after product recalls in December and January of cereals, bars and snacks that had "the potential to be contaminated with Salmonella" after a cereal bar was found to be contaminated in November.
The US Food and Drug Administration warned about potential contamination to other factories, saying Salmonella may have been present over the past four years at the factory responsible, according to a warning letter sent to PepsiCo in June.
Today, results showed quarterly earnings per share came in at $2.28 on an adjusted basis, up 10% year-on-year on a constant currency basis and beating the Wall Street consensus forecast of $2.16.
Revenue of $22.5 billion was generated in the three months to end-June, up 0.8% on a net basis, with organic growth of 1.9%, versus consensus expectations of $22.57 billion.
"During the second quarter, our business delivered net revenue growth, strong gross and operating margin expansion and double-digit EPS growth, remaining agile despite facing difficult net revenue growth comparisons versus the prior year," said chairman and CEO Ramon Laguarta.
He said this was despite the subdued performance for convenience foods in North America and the impacts associated with the Quaker Foods product recalls in North America.
"For the balance of the year, we will further elevate and accelerate our productivity initiatives and make disciplined commercial investments in the marketplace to stimulate growth," he said.
Investment will be focused on "amplifying our advertising and marketing initiatives".
As a result, Laguarta said full-year organic revenue growth would be approximately 4%, previously saying "at least 4%" and the board has "a high degree of confidence in delivering at least 8% core constant currency EPS growth, having previous sait this should grow "at least 8%".