One might be tempted to think that beating the consensus estimates is a reason to celebrate, but in the case of PepsiCo Inc. (NYSE:$PEP), this may not be the case.

On Wednesday, October 4th, the fizzy drink giant beat Wall Street forecasts of $1.43 EPS with a reported EPS of $1.48. The report also caused prices to rise slightly.

The EPS surge is thought to be brought on by subsidiary companies such as Quaker Foods North America and Frito Lay North America moving towards developing healthier foods, as well as a cost-cutting focus.

However, not all the news was good.

Revenue growth outlook dropped from 3% to 2.3% after the company was forced to respond to a challenging 3rd quarter. During this time period, sales were unaffected when compared to the previous year, but operating profit fell 2%.

PepsiCo Chair and CEO Indra Nooyi said, “Overall, our businesses performed well in the third quarter in what continues to be a challenging environment. Each of our operating sectors delivered results in line with or ahead of our expectations, with the exception of North America Beverages where revenues declined following two consecutive years of very strong third-quarter growth.”

Nooyi confirmed that there was no doubt that Pepsi had underperformed during the quarter. Despite claiming that they “hate to blame weather”, Nooyi cited the recent earthquake in Mexico and the series of tropical storms in the Caribbean as partially responsible for the slump.

Also on Nooyi’s list of things to blame was the sheer size of Pepsi. Due to the size, Pepsi is often slower to respond and loses shelf space to upstart brands who have an easier time capitalizing on the latest beverage trends.

In regards to capitalizing on those trends with new acquisitions, Nooyi stated, “the stuff we’ve looked at so far, we don’t see a clear path to”.

PepsiCo forecasts increased from $5.13 to $5.23.

Bonnie Herzog, an analyst at Wells Fargo Securities LLC, wrote, “Despite the beat & EPS raise, we see little reason to get excited about PEP’s Q3 results given increasing cost headwinds, and NAB [North American beverage] results that were much worse than we expected”.

Barclays analyst Lauren Lieberman had this to say, “With PepsiCo shares under-performing even in the context of a broader Staples sell-off (PEP -5.8% vs. XLP -2.1% since 9/5), we think that the market is pricing in concerns around both the quarter and the longer-term outlook. As it relates to the quarter, most of the dialogue is focused on weakness in the North America Beverages scanner data (PEP dollar sales down -6.3% for the 12 weeks ending 9/9) and whether that will impact the company’s ability to deliver on its full-year growth target of ‘at least 3%’ organic sales growth.”

Featured Image: csmonitor