Food and beverage giant PepsiCo, Inc. (PEP) Thursday reported a 5 percent decline in first-quarter profit, as revenue grew only marginally and expenses increased. Adjusted earnings topped Wall Street expectations and the company backed its full year forecast.
Chairman and CEO Indra Nooyi said, "We delivered solid organic revenue growth and double-digit core EPS growth in the first quarter, driven by our balanced food and beverage product and global geographic portfolio. Our investments in creating this portfolio are paying off and our brand and innovation strategies are driving sustainable top-line growth."
Earlier this week, rival Coca-Cola Co. (KO) reported a 15 percent decline in first-quarter profit, reflecting charges and lower revenues.
Net Income attributable to PepsiCo fell to $1.075 billion from $1.127 billion. Earnings per share decreased to $0.69 from $0.71. The company attributed the profit decline to the impact of the devaluation of net monetary assets in Venezuela.
Core earnings were $0.77 per share while it was $0.69 per share last year. On average, 13 analysts polled by Thomson Reuters expected earnings of $0.71 per share for the quarter. Analysts' estimates typically exclude special items. Net revenue edged up 1 percent to $12.58 billion from last year's $12.43 billion, reflecting the impacts of foreign currency translation and structural changes, primarily refranchising in China. Analysts expected revenues of $12.61 billion for the quarter.
Organic revenue grew 4.4 percent, driven by balanced volume growth and effective net pricing.
Business-wise, PepsiCo Americas Foods generated 5 percent higher revenues at $5.124 billion with a 4 percent rise in Frito-Lay North America and a 2 percent improvement in Quaker Foods North America. Latin America Foods recorded an 11 percent growth at $1.367 billion. Revenue at PepsiCo Americas Beverages slid 1 percent at $4.420 billion, reflecting a less than 1 percentage-point impact of unfavorable currency impact.
Europe generated 5 percent higher revenues at $1.942 billion. Both snacks and beverages grew organic volume in the latest quarter.
Revenue from Asia, Middle East & Africa declined 14 percent to $1.095 billion, amid structural changes, principally the refranchising of bottling operations in China, and an unfavorable 2-percentage-point impact from foreign exchange translation.
Snacks volume advanced 4 percent while Beverages volume rose 3 percent in the quarter.
Operating profit slid 4 percent to $1.66 billion as Selling, general and administrative expenses advanced 6 percent.
Further, Pepsi reaffirmed its 7 percent core constant currency earnings per share growth guidance for 2013, compared to 2012 core earnings per share of $4.10. Wall Street expects earnings of $4.39 per share for the year.
Excluding the impact of structural changes and foreign exchange translation, organic revenue is expected to grow mid-single digits, in line with the company's long-term targets.
Pepsi said it is on track to deliver targeted $900 million of productivity savings during 2013 and $3 billion in productivity savings by 2015.
Further, the firm said it is also on track to return $6.4 billion to shareholders in 2013 through $3.4 billion in dividends and $3 billion in share repurchases.
PEP closed at $78.85 on Wednesday. The stock is up 1.2 percent in pre-market activity.
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