PepsiCo Profit Tops Estimates As North American Snacks Gain
PepsiCo Inc. posted first-quarter profit that beat analysts’ estimates after North American snack sales rose, helped by price increases.
Earnings were 89 cents a share, excluding some items, the Purchase, New York-based company said in a statement on Monday. Analysts estimated 81 cents, according to data compiled by Bloomberg. Sales fell 2.9 per cent to $11.9 billion, matching analysts’ average projection.
Chief Executive Officer Indra Nooyi has cut costs and worked to expand growth in emerging markets, but it was the domestic snack unit that bolstered the company’s results in the quarter. Revenue from PepsiCo’s Frito-Lay division rose 3 percent to $3.42 billion, helping make up for declines in some of its international units, where the strong dollar reduced the value of sales generated in local currencies.
PepsiCo maintained its forecast for earnings of $4.66 a share this year, excluding some items. Analysts estimate $4.71.
The shares rose 1 per cent to $104.78 at 7:22 am in New York. The stock was up 3.9 per cent this year through last week.
Net sales in the North America Beverages division rose 1.5 per cent to $4.36 billion. PepsiCo has increased its "better-for-you" offerings to appeal to customers wary of its flagship products. The company removed aspartame from Diet Pepsi in August, 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 released a new soda brand in March and opened a New York-based restaurant and event space in January to bolster its image with craft-loving millennials.
Net revenue from most of PepsiCo’s international units declined, driven by the dollar’s strength:
Europe and Sub-Saharan Africa sales fell 9.2 per cent to $1.36 billion. Asia, Middle East and North Africa sales rose 1.3 per cent to $1.07 billion. Latin America sales dropped 26 per cent to $1.04 billion.
Flush with cash, the company is open to making acquisitions, but it hasn’t found the right target, Nooyi said at an analyst conference in February. Chobani LLC turned down an offer from PepsiCo to purchase the yoghurt-maker in its entirety, instead looking for a minority investment. That move could have helped reignite growth in PepsiCo’s Quaker Food North America unit, which saw sales fall 3.4 per cent to $617 million last quarter.
PepsiCo altered its US management structure last month, combining its domestic beverage and snack units under one leader, Al Carey. The move reflects the company’s dedication to remaining one company after activist investor Nelson Peltz previously called for the two divisions to be separated.
Stifel Financial Corp. analyst Mark Swartzberg said in a report last week that combining the units is "unlikely to drive improving organic revenue growth."
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