PepsiCo Profit Tops Estimates on North American Snack Gains

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Pepsico 2Q Profit Beats Analysts' Estimates

PepsiCo Inc. 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 June 13 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 flavor. The unit’s net sales gained 1.9 percent 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 percent this year, up from a previous forecast of 7 percent. However, the strong dollar will continue to weigh on profit, with exchange rates reducing earnings per share by 11 percentage points.

Shares Rise

PepsiCo, the world’s largest snackmaker and second-largest non-alcoholic beverage company, fell 1.1 percent 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 percent 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.”

In another change to adapt to the shifting customer environment, PepsiCo on Wednesday said it gave Johnston the additional title of vice chairman and put him in charge of the company’s global business and information-solutions function. The company said the move reflects the growing importance of technology and e-commerce.

The strong dollar took a bite out of PepsiCo’s international revenue. Sales fell 24 percent in Europe, 4.4 percent in Asia, the Middle East and Africa, and dropped 5.7 percent in the Latin America Foods division.

Sales in the Quaker Foods North America unit slid 3.2 percent.

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