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PepsiCo Profit Tops Analysts’ Estimates

PepsiCo Profit Tops Analysts’ Estimates as Peltz Seeks Breakup
Global drink sales volumes, excluding the effects of acquisitions, divestitures and foreign-currency fluctuations, rose 1.5 percent. Photographer: Susana Gonzalez/Bloomberg

July 24 (Bloomberg) -- PepsiCo Inc., the food and beverage company that investor Nelson Peltz is trying to split up, posted second-quarter profit that topped analysts’ estimates as it boosted prices and sales volumes.

Net income rose 35 percent to $2.01 billion, or $1.28 a share, from $1.49 billion, or 94 cents, a year earlier, Purchase, New York-based PepsiCo said today in a statement. Profit excluding some items was $1.31 a share. The average estimate of 16 analysts surveyed by Bloomberg was $1.19.

The results may help Chief Executive Officer Indra Nooyi fend off pressure from Peltz’s Trian Fund Management LP to acquire cookie maker Mondelez International Inc. or at least split PepsiCo’s food and beverage units to boost value. PepsiCo has improved its beverage market share and sustained snack dominance in the U.S. during the past year.

“The risk of an $80 billion transaction and then trying to drive a lot of synergies out of that, taking on all the integration risks, we just don’t think it makes sense for PepsiCo shareholders,” Chief Financial Officer Hugh Johnston said in an interview on Bloomberg television.

Sales rose 2.1 percent to $16.8 billion, matching analysts’ average estimate. Global drink sales volumes, excluding the effects of acquisitions, divestitures and foreign-currency fluctuations, rose 1.5 percent, while snack sales volume on that basis advanced 3 percent.

PepsiCo, the world’s largest snack-maker and second-largest soft-drink maker, fell 0.2 percent to $86.06 at 9:47 a.m. in New York. The shares gained 26 percent this year through yesterday, compared with a 19 percent gain for the Standard & Poor’s 500 Index.

Peltz Proposal

Peltz said at a conference in New York on July 17 that PepsiCo should acquire Mondelez for $35 to $38 a share in an all-stock deal that would be valued at as much as $67.8 billion. Mondelez, the Deerfield, Illinois-based maker of crackers and sweet snacks, closed at $29.87 on July 16 in New York before Peltz’s comments, giving the company a market value of about $53.3 billion.

Following Peltz’s proposal, PepsiCo said in a statement that it was confident in its “ability to deliver long-term shareholder value as an integrated food and beverage company.”

The proposals by Trian, which owns stakes in PepsiCo and Mondelez, “remain very much ‘back-burner’ considerations until either fundamentals falter and/or shareholders become more broadly vocal,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York, said in a note last month. Dibadj rates PepsiCo outperform, the equivalent of a buy.

On July 16, Coca-Cola reported second-quarter profit that fell 4 percent, the second decline in a row, as sales were sapped by economic weakness in China and Europe, shifting tastes in the U.S. and unseasonable weather in places such as India.

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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