* 1st-qtr EPS 77 cents tops Wall St estimate of 71 cents/shr
* Stands by 2013 outlook, saying it may reinvest in business
* Shares up 4 percent in morning trading (Adds CEO comments)
By Martinne Geller
April 18 PepsiCo Inc posted better-than-expected quarterly earnings on Thursday, as price increases helped margins, sending its shares up 4 percent.
The maker of Pepsi-Cola, Tropicana juice and Frito-Lay snacks kept its full-year forecast unchanged, however, saying it may reinvest in its business and adjust pricing moving forward.
Still, the strong results are a validation of the turnaround strategy of Indra Nooyi, who led the company through a "transition year" in 2012, during which it sacrificed profits to invest in marketing and innovation.
"The business momentum continues to look solid, as PepsiCo delivered its first earnings growth quarter in over a year," JP Morgan analyst John Faucher said, noting that the company's stock had been weaker than its peers in the past few days.
Despite the better-than-expected first quarter, Chief Financial Officer Hugh Johnston told analysts not to increase their 2013 estimates, citing a "volatile world" and a higher tax rate moving forward. In addition, soda prices may not stay as high as they were in the first quarter.
PLAYING THE GAME
PepsiCo, based in Purchase, New York, decided to raise prices on some of its drinks more than its rivals during the quarter, a move that predictably boosted profits but hurt sales.
The Americas drink business saw operating profit rise 8 percent while revenue fell 1 percent.
"We look very carefully at this trade-off between volume, pricing and profit," Nooyi said. "As we go forward, expect us to continue to play a responsible game in North American beverages, to be competitive, of course, to also enhance our performance."
The company will not let its volume decline for the balance of the year be as big as it was in the first quarter, she said.
For PepsiCo overall, sales volume rose 4 percent for snacks and 3 percent for beverages. In the Americas, volume rose 3 percent in foods and fell 3 percent in beverages.
Net income was $1.08 billion, or 69 cents per share in the first quarter, down from $1.13 billion, or 71 cents per share, a year earlier.
Excluding a hit from the Venezuelan currency devaluation, restructuring charges and other items, earnings were 77 cents per share, a 12 percent increase from a year earlier.
On that basis, analysts on average were expecting 71 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose about 1 percent to $12.58 billion. Excluding the impacts from currency translation and refranchising its business in China, revenue grew 4 percent.
PepsiCo increased its advertising and marketing spending by 11 percent in the first quarter. For the full year, it expects that spending rise at or above the rate of revenue growth, forecast at a mid-single-digit rate.
Earlier this week, Coke reported a slightly better-than-expected profit and said it was taking steps to refranchise its U.S. distribution system, less than three years after acquiring the bulk of it in a $12.3 billion deal.
Coke's 2010 acquisition followed a similar move by PepsiCo, which said on Thursday that it was exploring structural alternatives, but would not discuss it until early next year.
For the full year PepsiCo said it still expects 2013 earnings to grow 7 percent from the $4.10 per share it earned in 2012.
Its shares rose $3.37, or 4 percent to $82.27 on the New York Stock Exchange. (Reporting by Martinne Geller in New York; Editing by Gerald E. McCormick, Maureen Bavdek and Andrew Hay)