(Bloomberg) -- PepsiCo Inc. reduced its revenue outlook, citing slower-than-expected growth and international unrest, but said cost cutting and greater efficiency will allow it to meet its profit goal.
Full-year organic revenue is now expected to rise by a low single-digit percentage, the company said in a statement on Tuesday, down from PepsiCo’s previous target of 4%. Earnings per share are still expected to grow by at least 8% this year, when adjusted for currency volatility.
PepsiCo “will focus on tightly managing our costs to better align with the subdued growth environment,” Chief Executive Officer Ramón Laguarta said in a statement. The company has invested in automation, including in its warehouses, manufacturing, and distribution centers, Laguarta told analysts during the company’s conference call.
The shares rose as much as 1.5% in New York trading Tuesday, paring the stock’s year-to-date decline to about 1%. The S&P 500 Index has gained 20% over the same period.
Jefferies analyst Kaumil Gajrawala said in a note to clients that there was debate over whether PepsiCo would cut its profit guidance along with organic sales. The fact that the company didn’t is “impressive,” he said, and shows how PepsiCo’s “operating model can deliver” despite tougher economic conditions.
The maker of Lay’s potato chips and Lipton teas is adjusting its strategy as higher prices across the economy cause consumers to rein in spending or switch to cheaper store-branded options. Volumes for most divisions slipped in the third quarter.
PepsiCo expects inflation to moderate, but consumers are seen remaining “value conscious and choiceful with their purchases,” it said Tuesday in emailed commentary on the results. The company also sees an opportunity in the football season to create more brand awareness and sell larger sized bags of chips.
Related: Analysts Respond to PepsiCo’s Lower Guidance
Laguarta also cited “business disruptions due to rising geopolitical tensions in certain international markets.” The company doesn’t see the situation changing in the coming months, he said during the company’s call with analysts.
The conflict in the Middle East has continued to hurt a number of American brands, including through boycotts against McDonald’s and KFC in Asian and Mideast markets. US brands, targeted due to American support of Israel, have sought to distance themselves from the conflict.
“There have been widespread reports of boycotts related to US brands, that’s hurt their volumes also,” said Garrett Nelson, an analyst at CFRA. “In our channel checks, we’re seeing that impact.”
PepsiCo is also still suffering setbacks related to the Quaker Oats recall late last year. Still, the company saw modest volume growth for its convenient foods divisions in Europe and Asia Pacific.
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