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Why Pepsico Stock Slipped Today

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Shares of Pepsico (NASDAQ: PEP), the global food and beverage giant, finished the day lower as its first-quarter beat was counteracted by a recall in its Quaker Foods business and a drop in U.S. sales.

As a result, the stock closed today’s session down 3%.

Aluminum beverage cans next to each other.

Image source: Getty Images.

Pepsi falls short of high expectations

Pepsico has historically been a slow-growth company, but it has earned a high-earnings multiple for its competitive advantages and recession-proof business.

However, investors seem to think the stock’s valuation is a bit stretched currently, as a beat on the top and bottom lines wasn’t enough to deserve a higher share price.

Revenue in the quarter rose 2.3% to $18.3 billion, edging out the consensus at $18,07 billion, while organic revenue increased 2.7%. Revenue was up in all of its segments except Quaker Foods, which fell 24% due to product recalls and difficult comparisons with the quarter a year ago. Those recalls also led to a generally accepted accounting principles (GAAP) operating loss in the period, though overall core constant-currency earnings per share were up 7% to $1.61, driven by strong performance in international markets.

That result beat the analyst consensus at $1.52.

CEO Ramon Laguarta said, β€œDuring the first quarter, our businesses remained agile and performed well, with a strong performance from our international business.”

Pepsi sees stronger growth ahead

For the full year, management maintained its guidance, calling for at least 4% organic revenue and at least an 8% increase in core constant currency EPS to at least $8.15.

Given that forecast, there’s no reason to panic on today’s pullback. Investors just seem to believe the stock could use a breather for valuation reasons even though the overall growth story remains intact.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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