- Beverage maker maintains profit forecast for current year
- Domestic snack division sales rise 3 percent to $3.42 billion
PepsiCo Inc. posted first-quarter profit that beat analysts’ estimates after strong sales of snacks in North America took the sting out of weaker results abroad.
Earnings were 89 cents a share, excluding some items, the Purchase, New York-based company said in a statement on Monday. Analysts estimated 81 cents, according to data compiled by Bloomberg. Sales fell 2.9 percent to $11.9 billion, matching analysts’ average projection.
With the strong dollar hurting sales abroad, PepsiCo’s Frito-Lay division bolstered the company’s results in the quarter. Sales at the unit -- which makes Doritos, Cheetos and Lay’s chips -- rose 3 percent to $3.42 billion, helped by a 2.5 percent increase in average pricing. Chief Financial Officer Hugh Johnston said Monday that he expects PepsiCo’s domestic business to continue balancing out the weakness in emerging markets with “struggling” economies.
“The American consumer is still doing well and still benefiting from lower gas prices,” Johnston said in an interview. “I think the U.S. business can continue to perform quite strongly.”
PepsiCo maintained its forecast for earnings of $4.66 a share this year, excluding some items. Analysts estimate $4.71.
The shares rose 0.5 percent to $104.25 at 10 a.m. in New York. The stock was up 3.9 percent this year through last week.
Net sales in the North America Beverages division rose 1.5 percent to $4.36 billion. PepsiCo has increased its “better-for-you” offerings to appeal to customers wary of its flagship products. The company removed aspartame from Diet Pepsi in August, announced a partnership with smoothie maker BarFresh Food Group Inc. in October and introduced a line of healthy vending machines in December.
The company also released a new soda brand in March and opened a New York-based restaurant and event space in January to bolster its image with craft-loving millennials.
Net revenue from most of PepsiCo’s international units declined, driven by the dollar’s strength:
- Europe and Sub-Saharan Africa sales fell 9.2 percent to $1.36 billion.
- Asia, Middle East and North Africa sales rose 1.3 percent to $1.07 billion.
- Latin America sales dropped 26 percent to $1.04 billion.
Flush with cash, the company is open to making acquisitions, but it hasn’t found the right target, Nooyi said at an analyst conference in February. Chobani LLC turned down an offer from PepsiCo to purchase the yogurt-maker in its entirety, instead looking for a minority investment. That move could have helped reignite growth in PepsiCo’s Quaker Food North America unit, which saw sales fall 3.4 percent to $617 million last quarter.
PepsiCo altered its U.S. management structure last month, combining its domestic beverage and snack units under one leader, Al Carey. The move reflects the company’s dedication to remaining one company after activist investor Nelson Peltz previously called for the two divisions to be separated.
Stifel Financial Corp. analyst Mark Swartzberg said in a report last week that combining the units is “unlikely to drive improving organic revenue growth.”