PepsiCo Surges as Snack Sales Help Profit Beat Estimates

PepsiCo Inc. surged to the highest price in at least 32 years after the world’s largest snack-food maker reported first-quarter profit that topped analysts’ estimates, helped by global snack sales.

The shares jumped 3 percent to $81.25 at the close in New York, the highest price since at least July 1980, according to split-adjusted data compiled by Bloomberg.

Chief Executive Officer Indra Nooyi, working to boost snack sales, has increased marketing on key brands including Lays potato chips and Quaker oatmeal. Nooyi has also put emphasis on soft drinks to regain market share from Coca-Cola Co. Global drink sales volumes in the quarter, excluding acquisitions, divestitures and currency fluctuations, rose 1 percent, while snack sales volume on that basis gained 4 percent.

“The business momentum continues to look solid, as PepsiCo delivered its first earnings growth quarter in over a year,” John Faucher, an analyst with JPMorgan Chase & Co in New York, said today in a note. He rates the shares overweight, equivalent of a buy.

First-quarter net income fell 4.6 percent to $1.08 billion, or 69 cents a share, from $1.13 billion, or 71 cents, a year earlier, PepsiCo said today in a statement. Profit excluding some items was 77 cents a share, beating the 71-cent average of 14 analysts’ estimates compiled by Bloomberg.

Snack Sales

Frito Lay North America sales volume increased 4 percent in the quarter while PepsiCo Americas Beverages declined 3 percent. Snack volume sales in Europe advanced 4 percent as beverages increased 1 percent.

PepsiCo has shown “further evidence of improving topline trends for Frito Lay North America, and comparatively high growth in International,” Mark Swartzberg, an analyst for Stifel Financial Corp. in New York, said in an April 12 note. He recommends holding the stock.

On a conference call today, PepsiCo Chief Financial Officer Hugh Johnston reiterated that all options are on the table to restructure the company’s North America beverage operations and the company will update investors in early 2014.

Total sales rose 1.2 percent to $12.6 billion, beating the $12.5 billion average of analysts’ estimates. Unfavorable currency fluctuations reduced sales by 0.5 percentage points, the company said.

Currency Impact

PepsiCo reiterated that earnings per share in 2013 will increase 7 percent from the $4.10 in 2012. That implies profit of $4.39, matching the average of analysts’ estimates. The company expects currency translation to reduce full-year earnings per share, excluding some items, by 1 percentage point, according to the statement.

PepsiCo shares have gained 19 percent this year compared with a 16 percent increase for Coca-Cola and an 8.1 percent advance for the Standard & Poor’s 500 Index.

On April 16, Atlanta-based Coca-Cola reported first-quarter profit that topped analysts’ estimates and announced a deal to sell some bottling distribution rights in North America.

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