PepsiCo 'firing on all cylinders' as it preps for a mild recession, exec says

PepsiCo (PEP) is bullish on 2023 amid a bigger push into zero-sugar sodas and higher prices, though it acknowledged that the economic outlook is uncertain.

The company's longtime vice chairman and CFO Hugh Johnston told Yahoo Finance that his team's base case is for a mild recession this year.

"Frankly, we are coming out of 2022 which was just an outstanding year," Johnston said (video above). "I mean, 14% revenue growth, strong EPS. Obviously, the company is just firing on all cylinders. We have good momentum coming into the year, but we are also aware of the fact in a high-interest rate environment it could start to drag at some point."

Still, PepsiCo isn't planning to get too promotional on its products to drive sales. Johnston says the company is focusing on driving operating efficiencies to offset any economic weakness.

Here is how PepsiCo performed compared to Wall Street estimates for the fourth quarter:

Net Sales: $27.99 billion vs. $26.88 billion

Frito Lay North America Sales: $7.7 billion vs. $7.19 billion

Quaker Foods North America Sales: $1.05 billion vs. $1.01 billion

PepsiCo Beverages North America Sales: $8.1 billion vs. $.7.94 billion

European Sales: $4.3 billion vs. $4.18 billion

Latin American Sales: $3.4 billion vs. $3.2 billion

Africa, Middle East & South Asia Sales: $2 billion vs. $1.97 billion

Asia Pacific, Australia, New Zealand & China Sales: $1.5 billion vs. $1.43 billion

Organic Sales Growth: +14.6% vs. +8.27%

Core EPS: $1.67 vs. $1.64

2023 Guidance

Core EPS: +8% to about $7.20 vs. $7.28 exp

PepsiCo stock was up more than 1% in Thursday afternoon trading.

And despite any recession concerns, Wall Street is staying with PepsiCo's stock.

"PEP's quarter was solid, in our view," JP Morgan analyst Andrea Texeira wrote in a client note. "In a Staples earnings season thus far characterized by volumes coming in softer than expectations, PEP's modest volume decline of -2% (exceeded Street expectations), which actually accelerated sequentially on a 3Y CAGR (to +2.0% from +1.6% in 3Q), despite much higher than expected pricing (+16% vs. Street +12%; 3Y CAGR accelerated to +8.6% from +8.0% in 3Q), demonstrates the resilience of PEP's categories and brands."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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