PepsiCo Q1 earnings top estimates, but recalls hurt results

PepsiCo (PEP) reported first quarter results that topped Wall Street estimates on both the top and bottom lines. However, recalls from its Quaker Foods North America unit did put a damper on sales.

Yahoo Finance's Seana Smith and Brad Smith recap the food giant's results.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Stephanie Mikulich.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Diving into some trending tickers this morning. Pepsi seeing net sales rise just over 2% in the first quarter but taking a hit on volume, particularly in its North American Quaker Food division, which plummeted 22% as it grapples with a recall for potential salmonella contamination.

You're taking a look at shares only fractionally moving higher on these results by about 1/10 of a percent here. One of the huge things that the company is talking about in this most recent report, as well-- looking ahead continuing to focus efforts on executing in the marketplace, also going to elevate and accelerate their productivity initiatives. So some big investments that could potentially be coming forward from the business, as well. And then additionally here, expecting to deliver 4% organic revenue growth, 8% core growth, as well here. So that for the business that houses not just soda but also some of the other drinks and beverage products plus snacks.

SEANA SMITH: I think my takeaway here was that this is a real glimpse at the consumer. When you take a look at the volume declines, especially here in the US, it highlights the fact that the consumers are under pressure, they are a bit stressed in the midst of this higher rate environment and also higher prices environment, clearly weighing on consumer decisions right now. And Cowan calling that out in their instant reaction to this report, saying that the reiterated guidance here from Pepsi really highlights the uncertain consumer backdrop, also slower trends that we are seeing in the North American business. So a continuation kind of that trend lower that we have seen over the last couple of quarters.

Now, I also want to point out, though, some interesting commentary that our executive editor Brian Sozzi-- he spoke with the CEO of PepsiCo, and he's talking about the volume declines that we have seen. And he did offer a bit of a silver lining here, at least in terms of some of the trends that they saw in the most recent quarter and the current quarter right now. And he that he expects volume activity here or volume numbers to really start to improve.

And I think you can take from that a couple of things-- one, I think you can point to the fact that maybe the consumer is going to recover just a little bit. Two, maybe the worst of inflation is behind us, maybe we won't see those type of price hikes that we had seen over the last couple of quarters. And then three, some of the pressures that it seems like in PepsiCo's business, at least in its most recent quarter, maybe the worst of that is behind them and they will start to see improvement here in North America, because when you compare the North America numbers to what we're seeing internationally, international was a huge standout here for PepsiCo.

BRAD SMITH: It was a standout. Europe, the volume difference, that was up by about 2% in the convenient foods, 7% in the beverages. So a plus there a plus in EMEA, ultimately all in, and in the Asia-Pacific region, as well.