11:23 AM EDT, 07/12/2024 (MT Newswires) -- PepsiCo's ( PEP ) fiscal Q2 went mostly as predicted, with its international division growing while North America, especially Frito Lay, remained challenged, RBC Capital Markets said in a note Friday.

Analysts, including Nik Modi, said Frito Lay's sales trend will be crucial for the rest of the year. Frito faced pressure in Q2 with flat organic sales and declining volumes of 4%, compared with -2% in Q1, mainly due to ongoing consumer challenges. Management plans to boost volume recovery by investing more in promotions for certain parts of their product lineup in the latter half of the year.

Since Frito Lay is crucial to PepsiCo's ( PEP ) overall performance, investments aimed at increasing sales volume will likely lower Frito's profit margins, impacting PepsiCo's ( PEP ) earnings outlook for the second half of the year, the analysts added.

"We believe the company's moderated 2024 outlook is achievable, but note that most consumer packaged goods companies are expecting most of their growth for the year to come in the second half of the year, which could prove to be too optimistic if the consumer remains under pressure," the analysts said.

The analysts said they expect fiscal 2024 organic growth to be at 3.8% "reflecting the quarter and modestly adjusting segment level trends most notably softer Frito trends." They are maintaining their fiscal 2024 earnings per share estimate at $8.15.

RBC adjusted PepsiCo's ( PEP ) price target to $177 from $180 while keeping its sector perform rating.

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