Pepsi: Snacks, Not Soda, Boost Shares

Shares of Pepsi (PEP) are gaining today after the company reported better-than-expected earnings as solid snacks trumped sinking soda sales.

AFP

The Wall Street Journal has the details:

The maker of Lay’s potato chips and Pepsi colas posted a flat profit for the quarter, though earnings beat Wall Street estimates. Organic revenue, which excludes the effects of foreign exchange, improved 3.3%, driven by growth in Frito-Lay North America, Latin America foods and in key developing and emerging markets such as China and Brazil.

PepsiCo reported a profit of $1.91 billion, or $1.23, a share, up from $1.9 billion, or $1.21 a share, a year earlier. Excluding items such as mark-to-market losses on commodity hedges and restructuring charges, core earnings totaled $1.24 a share from $1.20 a share. Revenue rose 1.5% to $16.91 billion.

Analysts polled by Thomson Reuters most recently forecast earnings of $1.17 a share on revenue of $16.96 billion.

Citigroup’s Wendy Nicholson calls the report mixed:

While many of PEP's segments showed strength in 3Q (most notably FLNA, LatAm Foods, China, and Brazil), we also saw weaker results in Americas Beverages (which we are used to seeing) and AMEA (which we aren't used to seeing, but slowed in 3Q owing mainly to political unrest in Egypt and an aggressive pricing environment in India). As for PEP's flagship Americas Beverages segment, mgmt acknowledged the category "doesn't have a lot of growth in it" although they do want to maintain rational pricing while also searching for operational improvements to enhance margins. Also notable, PEP stated that its R&D remains on track to release a new product in 2014 (likely involving natural sweeteners and possibly new flavoring agents).

Shares of PepsiCo have gained 1.6% to $81.89, while Coca-Cola (KO), which released earnings yesterday, has risen 0.6% to $37.88 and Dr. Pepper Snapple (DPS) has advanced 2.1% to $44.68.