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Pepsi's Growth Story Was All About Pricing

Positive net pricing drove nearly the entirety of the firm's 5% second-quarter organic revenue growth year over year, while volume growth slowed to a halt.


 PepsiCo (PEP) continued to post solid price-driven organic revenue and profitability growth in its second quarter, and we are likely to raise our fair value estimate by $1-$2 to account primarily for the time value of money since our last update.

Overall, the firm executed against its cost-saving plan, particularly in its Frito-Lay North American segment, and operating margins (excluding restructuring and other charges) ticked up 62 basis points from a year ago. Frito-Lay remains the firm's most profitable segment, but after stripping out the sharply negative impact of foreign currency headwinds, which dragged down revenue and operating earnings growth 10 percentage points across the entire company, we're encouraged that the PepsiCo Americas beverages division also saw adjusted operating profit grow considerably faster than sales.

Adam Fleck does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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