PepsiCo Lifts Earnings Forecast As North American Divisions Gain
PepsiCo Inc. posted second-quarter profit that beat analysts’ estimates and raised its full-year forecast as sales of snacks and soft drinks in North America helped overcome weaker results abroad.
Earnings rose to $1.35 a share, excluding some items, the Purchase, New York-based company said in a statement Thursday. Analysts estimated $1.29, on average. PepsiCo boosted its forecast for annual earnings growth to 9 percent from 8 percent.
Chief Executive Officer Indra Nooyi has benefited from the relative strength of the U.S. market as well as cost-cutting measures that have supported profitability. She also has worked to expand PepsiCo’s presence in emerging countries, but the shaky global economy and stronger dollar have hurt results in those regions.
Sales fell 3 percent to $15.4 billion, meeting analysts’ average projection.
PepsiCo has increased its “better-for-you” offerings in light of declining soda consumption in the U.S. and other markets. The company announced a partnership with smoothie maker BarFresh Food Group Inc. in October and introduced a line of healthy vending machines in December.
The company also attempted to appease drinkers wary of the artificial sweetener aspartame by removing the substance from its flagship diet soda in August. Yet many Diet Pepsi drinkers were displeased with the new taste, and PepsiCo announced last week it will reintroduce an aspartame-sweetened version of the drink. That beverage will be called Diet Pepsi Classic Sweetener Blend and sold alongside the newer, sucralose-sweetened version.
The chips and soda maker also faces challenges by way of legislation. Philadelphia became the first major U.S. city to pass a soft-drink tax last month. Since 2009, there have been about 40 attempts to enact a soda tax in cities across the U.S. Efforts in Philadelphia, and Berkeley, California, are the only ones that have passed.
Still, PepsiCo is flush with cash and looking to spend. The company is open to making acquisitions, but it hasn’t found a company with the right fit, Nooyi said an an analyst conference in February. Chobani LLC turned down the company’s attempt to buy it outright, instead looking for a minority investment. Had the deal worked out, it could have helped bolster growth in PepsiCo’s Quaker Foods North America unit.
PepsiCo united its U.S. management structure in March, combining its domestic beverage and snack units under one leader, Al Carey. Merging the units’ leadership reflects PepsiCo’s dedication to remaining one company after activist investor Nelson Peltz previously called for the two divisions to be separated.
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