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PepsiCo Q3 Profit Tops Estimates, Organic Revenue Up 4.9%; Updates 2018 Targets

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PepsiCo, Inc. (PEP) reported third-quarter core EPS of $1.59, an increase of 7 percent from prior year. Excluding the impact of foreign exchange translation, core constant currency EPS increased 9 percent. On average, 20 analysts polled by Thomson Reuters expected the company to report profit per share of $1.57 for the quarter. Analysts' estimates typically exclude special items.

Third-quarter reported EPS was $1.75, an increase of 18 percent from the third quarter of 2017. Foreign exchange translation negatively impacted reported EPS growth by 2 percentage points. Net income attributable to PepsiCo increased 16% year-over-year to $2.50 billion. The company noted that its reported third-quarter results were impacted by a provisional transition tax expense related to the Tax Cuts and Jobs Act, a non-cash tax benefit resulting from the conclusion of certain international tax audits, restructuring charges and commodity mark-to-market net impacts.

Third-quarter reported net revenue increased 1.5 percent to $16.49 billion from prior year. Foreign exchange translation had a 2-percentage point unfavorable impact on reported net revenue growth. Organic revenue, which excludes the impacts of foreign exchange translation and acquisitions, structural and other changes, grew 4.9 percent. Analysts expected revenue of $16.36 billion for the quarter.

CEO Indra Nooyi said: "We continued to see very strong operating performance from our international divisions, propelled by developing and emerging markets; Frito-Lay North America generated solid net revenue and operating profit growth; and North America Beverages delivered another quarter of sequential improvement in top-line performance."

The company updated its 2018 financial guidance and now expects: full year organic revenue growth to be at least 3 percent; core earnings per share of $5.65, an 8 percent increase compared to 2017 reflecting the expected unfavorable 1 percentage point foreign exchange translation impact. The company continues to expect core constant currency EPS growth of 9 percent.

"On the strength of our year-to-date results, we have revised upward our full-year organic revenue growth target. Additionally, given the recent strengthening in the U.S. dollar we have revised our full-year core earnings per share target to reflect our updated expectation of an approximate 1 percentage point headwind from foreign exchange translation," said CEO Indra Nooyi.

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