DE4CC0DE-5FC3-4494-BCBF-4D50B00366B5
A-Brands

PepsiCo Tops Quarterly Profit Estimates After Cutting Costs

By square1
Share this article
PepsiCo Tops Quarterly Profit Estimates After Cutting Costs

PepsiCo has reported better-than-projected profits and raised its annual forecast after reducing costs, giving the company more leverage in a looming fight with activist-investor Nelson Peltz.

Excluding some items, profits totalled $1.32 a share, the Purchase, New York-based company said in a statement. That topped the $1.23 average estimate of 17 analysts, according to data compiled by Bloomberg. PepsiCo expects to increase earnings per share by 8 per cent this year, excluding the effects of currency fluctuations, up from a previous target of 7 per cent.

The results may help chief executive officer Indra Nooyi ward off an attack from Peltz, the billionaire investor who has lobbied to break up the company’s snack and beverage businesses. PepsiCo’s management and board have spurned that idea, opting instead for a plan to improve performance and cut costs. The beverage company has now made enough progress that it’s ready to boost its forecast, chief financial officer Hugh Johnston said.

"The business is performing well right now, and as we’ve gotten further into the year, we’ve got confidence that we could take it up," Johnston said in an interview. "As we look at the balance of the year, we feel we have a pretty clear pathway."

Stock Climbs

ADVERTISEMENT

Shares of PepsiCo, which is second only to Coca-Cola Co. in the global beverage market, rose as much as 2.3 per cent to $91.25 in early trading. The stock had climbed 7.5 per cent this year, roughly in line with the Standard & Poor’s 500 Index.

PepsiCo’s results were helped by cost-cutting and a better-than-expected performance in Europe, Johnston said. Organic revenue grew 5 per cent in Europe, lifted by higher pricing and a 1-per-cent volume sales gain in both snacks and drinks. Johnston declined to comment on Peltz.

Second-quarter net income totalled $1.98 billion, or $1.29 a share, compared with $2.01 billion, or $1.28, a year earlier. Revenue rose 0.5 per cent to $16.9 billion, beating the $16.8-billion average of analysts’ estimates. Worldwide snacks volume increased 1 per cent, as did global beverage volume. The company said that it’s on track to deliver $1 billion in productivity savings this year.

The results outshone those of Coca-Cola Co., which reported quarterly revenue that missed analysts’ estimates. The Atlanta-based company is ramping up marketing spending to help reignite sales.

ADVERTISEMENT

PepsiCo’s new forecast would raise annual earnings to about $4.72 from $4.37, although foreign currency effects are expected to reduce growth by about 4 per cent, the company said.

Bloomberg News, edited by ESM

Get the week's top grocery retail news

The most important stories from European grocery retail direct to your inbox every Thursday

Processing your request...

Thanks! please check your email to confirm your subscription.

By signing up you are agreeing to our terms & conditions and privacy policy. You can unsubscribe at any time.