PepsiCo (PEP) Stock: Tariff Fizz Causes Flat Earnings Outlook for 2025

TLDR:

PepsiCo missed Q1 earnings expectations with $1.48 adjusted EPS vs $1.49-1.50 forecast Revenue fell 1.8% year-over-year to $17.92 billion Company cut full-year earnings guidance from mid-single-digit growth to flat Cited higher supply chain costs from tariffs and subdued consumer conditions Shares fell 1% in premarket trading following the announcement

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PepsiCo reported disappointing first-quarter results on Thursday, causing its stock to fall in premarket trading. The beverage and snack giant missed earnings expectations and lowered its full-year forecast, pointing to tariff concerns and weak consumer spending.

The company reported first-quarter revenue of $17.92 billion, down 1.8% from the same period last year. This marks the second consecutive quarter of year-over-year revenue decline.

PepsiCo, Inc. (PEP)

Earnings per share came in at $1.33, or $1.48 on an adjusted basis. Wall Street analysts had expected adjusted earnings of $1.49-1.50 per share.

In response to these results, PepsiCo shares dropped 1% to $140.80 in premarket trading. The stock has already declined about 5-6% since the start of the year.

Tariff Troubles and Consumer Caution

CEO Ramon Laguarta cited several factors for the company’s reduced outlook. “We expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs,” he said.

Laguarta also noted that “consumer conditions in many markets remain subdued and similarly have an uncertain outlook.” This caution reflects broader economic concerns affecting consumer spending.

PepsiCo now expects its full-year core earnings to be approximately flat compared to last year. This is a substantial downgrade from its previous forecast of mid-single-digit percentage growth.

Despite these challenges, the company still expects a low-single-digit percentage increase in organic revenue for the year.

The North American market has been particularly challenging for PepsiCo. Its Quaker Foods business has struggled to recover from product recalls in 2024.

Regulatory Challenges and Health Trends

Beyond economic factors, PepsiCo faces growing regulatory scrutiny. Health and Human Services Secretary Robert F. Kennedy Jr. has targeted ultra-processed foods high in sugar or containing synthetic ingredients like petroleum-based food dyes.

On Tuesday, the Department of Health and Human Services and Food and Drug Administration announced plans to phase out several food dyes. Some of these dyes are used in popular products like Frito-Lay’s Cheetos, which could impact PepsiCo’s manufacturing process and sales.

Kennedy’s proposed measures include prohibiting the purchase of soda and junk foods with food stamps. He’s also pushing for companies to either remove certain ingredients or label them more prominently.

These regulatory changes come as consumers increasingly prefer healthier food options. This shift presents a challenge for PepsiCo, whose most popular products typically prioritize flavor over health benefits.

Adapting to Market Changes

PepsiCo isn’t standing still in the face of changing consumer preferences. The company has been expanding its portfolio to include healthier options.

Last month, PepsiCo announced a deal to acquire the fast-growing prebiotic soda brand Poppi for nearly $2 billion. Prebiotic sodas often contain fewer calories, less sugar, and added fiber, marketed as beneficial for gut health.

This acquisition represents PepsiCo’s attempt to adapt to the evolving marketplace and capture growth in the health-conscious beverage segment.

The company’s stock has been on a downward trend since reaching its peak in May 2023. The recent earnings miss and reduced guidance are likely to put further pressure on the share price.

For investors, the key question is whether PepsiCo can navigate the dual challenges of rising costs and changing consumer preferences while maintaining profitability.

The immediate outlook appears challenging, with tariff concerns, regulatory pressures, and subdued consumer spending all weighing on the company’s prospects for the remainder of 2025.

PepsiCo’s next moves will be closely watched as it attempts to balance these pressures while pursuing growth opportunities in healthier product categories.

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