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PepsiCo Profit Tops Estimates on North American Snack Gains

Published on Jul 10 2015 7:29 AM in A-Brands tagged: Featured Post / PepsiCo

PepsiCo Profit Tops Estimates on North American Snack Gains

PepsiCo posted second-quarter profit that topped analysts’ estimates and boosted its forecast for the year, helped by cost cuts and rising snack sales in North America.

Earnings in the three months through 13 June were $1.32 a share, excluding some items, the Purchase, New York-based company said Thursday in a statement. Analysts estimated $1.24.

Chief executive officer Indra Nooyi has worked to trim expenses as the strong dollar damps sales abroad and Americans grow wary of soda over concerns about obesity and artificial sweeteners. Meanwhile, the Frito-Lay North America snacks business has built on popular brands like Doritos, adding a line called Doritos Roulette, which features the occasional spicy chip mixed in with its classic nacho-cheese flavour. The unit’s net sales gained 1.9 per cent in the quarter.

“It’s the innovation that’s driving the growth,” Chief Financial Officer Hugh Johnston said in an interview. “There’s fun value in that. These are social types of products.”

PepsiCo said core constant currency earnings per share -- which excludes the effects of acquisitions, divestitures and exchange-rate fluctuations -- will increase about 8 per cent this year, up from a previous forecast of 7 per cent. However, the strong dollar will continue to weigh on profit, with exchange rates reducing earnings per share by 11 percentage points.

PepsiCo, the world’s largest snackmaker and second-largest non-alcoholic beverage company, fell 1.1 per cent to $94.59 at the close in New York. The shares are little changed this year.

Second-quarter net income was little changed at $1.98 billion, or $1.33 a share. Revenue fell 5.7 percent to $15.9 billion, topping analysts’ $15.8 billion average estimate.

Revenue in PepsiCo’s Americas Beverages division rose 1.1 per cent in the quarter. Seeking to combat consumers’ unease with artificial sweeteners, the company said in April that it would start selling Diet Pepsi without aspartame after a consumer backlash hurt sales.

“It’s a smart move,” said Ken Shea, an analyst with Bloomberg Intelligence. “It shows how they’re attuned to where the consumer’s going.”

Bloomberg News, edited by ESM


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