(Adds shareholder comment, company background, updates stock
By Anjali Athavaley
July 23 PepsiCo Inc's
higher-than-expected quarterly profit could give the company
more ammunition against an activist investor who wants it to
separate its snack and beverage businesses.
The maker of Pepsi-Cola and Frito-Lay snacks raised its
full-year adjusted earnings forecast on Wednesday and said
organic revenue grew 5 percent in its global snacks business,
helped by strong sales of Lay's, Doritos and Cheetos chips. It
also reported a 2 percent organic sales increase in its beverage
business, which includes the Gatorade and Tropicana brands.
The sales increases were partly a result of price hikes that
PepsiCo implemented as it launched new products which usually
command higher prices. For instance, it has recently rolled out
new flavors of Lay's and a new "Baja Blast" Mountain Dew that
was previously available only at Taco Bell restaurants.
Inflation also prompted price increases in regions including
"We feel comfortable that we can sustain our pricing,"
Chief Executive Indra Nooyi told analysts on a conference call.
PepsiCo shares were up 2.7 percent at $91.59 on Wednesday
afternoon on the New York Stock Exchange. The shares have risen
7.5 percent so far this year as of Tuesday's close.
The earnings come as activist investor Nelson Peltz's Trian
Fund Management is urging the company to split its more
successful snack division from its sluggish beverage business.
Peltz said last week that a proxy fight at PepsiCo was a
The California teachers' retirement system, one of the
largest pension funds in the United States, has asked PepsiCo to
give Peltz a seat on the board, a development first reported in
the Financial Times on Wednesday morning. Calstrs owns a $250
million stake in PepsiCo.
Calstrs spokesman Ricardo Duran said in an email that the
fund has not taken a position on Peltz's proposed split of the
But he said "Calstrs firmly believes in Trian's successful
record in turning around underperforming companies, especially
in the consumer staples industry."
PepsiCo's chief financial officer, Hugh Johnston, declined
to comment on Trian's push in an interview on Wednesday. But he
reiterated the company's view that it is performing well by
keeping the businesses together.
The company's second-quarter results "will take some of the
heat off," said Jack Russo, consumer staples analyst at Edward
Jones. "It's always good to have an activist shareholder in
there stirring things up."
Snack volumes in North America grew 2.5 percent, but soda
volumes fell 2 percent, as health-conscious consumers favored
juices and health drinks.
Rival Coca-Cola Co on Tuesday reported flat soda
volumes in North America for the second straight quarter.
PepsiCo raised its full-year earnings per share growth
forecast to 8 percent from 7 percent, before taking into account
foreign exchange rates that it said could reduce earnings growth
by 4 percentage points.
PepsiCo's net income fell 2 percent to $1.98 billion, or
$1.29 per share, in the 12 weeks ended June 14, from $2.01
billion, or $1.28 per share, a year earlier.
Excluding items, the company earned $1.32 per share.
Revenue rose 0.5 percent to $16.89 billion.
Analysts on average had expected PepsiCo to earn $1.23 per
share on revenue of $16.81 billion.
(Reporting by Anjali Athavaley in New York and Siddharth Cavale
in Bangalore; editing by Kirti Pandey, Jilian Mincer and Matthew