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PepsiCo Profit Slips, But Tops Estimates

PepsiCo Profit Slips, But Tops Estimates
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4/26/2012 9:22 AM ET

Beverages and snack-food maker PepsiCo, Inc. (PEP: Quote) on Thursday reported a marginal drop in profit for the first quarter, amid a modest growth in revenue. Core earnings and revenues topped Wall Street estimates on pricing gains, and the company kept its 2012 core constant currency earnings guidance unchanged.

CEO Indra Nooyi said, "Our first quarter results reflect the strength of our brands which allowed us to implement significant pricing actions. Effective pricing and packaging initiatives drove 5 percent constant currency net revenue growth, allowing us to substantially offset approximately $300 million in commodity cost inflation."

Net income attributable to the company slipped to $1.13 billion from $1.14 billion in the same quarter last year. Earnings per share remained unchanged at $0.71.

Core earnings, which exclude one-time items, were $0.69 per share compared to $0.74 per share last year. On average, 14 analysts polled by Thomson Reuters expected the company to earn $0.67 per share. Analysts' estimates typically exclude special items.

Revenues for the quarter rose 4 percent to $12.43 billion from $11.94 billion in the prior year. On a constant currency basis, revenues grew 5 percent. Analysts had a consensus revenue estimate of $12.36 billion for the quarter.

Frito-Lay North America revenue grew 4 percent on higher pricing. Growth was particularly strong in the C-store, Dollar and Foodservice channels, owing to innovation and higher media spending.

Net revenue grew 11 percent in Latin America Foods, reflecting volume growth and pricing, partially offset by unfavorable currency translation.

In Quaker Foods North America, net revenue declined 3 percent and volume declined 5 percent, reflecting general category trends.

Revenues from Europe increased 13 percent, helped by Wimm-Bill-Dann acquisition and pricing, offset partially by unfavorable foreign currency translation.

Asia, Middle East & Africa reported net revenue growth of 12 percent, driven by pricing and volume growth. Snacks volume increased 16 percent and beverage volume grew 2 percent.

Looking ahead to 2012, the company still expects a decline in core constant currency earnings per share of approximately 5 percent from its fiscal 2011 core earnings per share of $4.40.

It expects core constant currency net revenue growth in low-single-digits reflecting the impact of structural changes, principally refranchisings. Excluding structural changes, the guidance is in line with the prior view of growth in mid-single-digits.

Early this year, PepsiCo said it would cut about 8,700 jobs, or nearly 3 percent of its global workforce, under a cost-savings program that is expected to generate $1.5 billion of incremental cost savings by 2014.

"Our top priorities include stepping up our brand support through increased advertising and marketing, accelerating our innovation, and driving an aggressive productivity agenda that includes a significant restructuring program. All of these initiatives were launched in Q1 with good results, are on track, and will gain momentum as the year progresses," Nooyi added.

The company anticipates more than $3 billion in share repurchases for 2012 and expects to pay $3.3 billion in dividends. The dividend reflects a 4 percent dividend per share increase effective with the dividend payable in June.

PEP closed on Wedneday at $66.67, up from the prior close of $66.51, on a volume of 7.06 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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