PepsiCo profit sizzles, boosts outlook for year; shares rise

NEW YORK (Reuters) - PepsiCo Inc PEP.N raised its full-year earnings forecast and said snack sales helped its quarterly profit beat expectations, sending its shares up more than 1 percent in morning trading on Thursday.

The company, which makes Frito-Lay snacks and beverage brands like Mountain Dew and Tropicana, said its quarterly performance underscored how its beverage and snacks businesses worked well together.

Still, challenges remained and in developed markets, consumer demand “continues to be sluggish and in developing and emerging markets, there is continued macro and political volatility, most notably in Eastern Europe, the Middle East and a number of markets in Latin America,” Chairman and Chief Executive Indra Nooyi said on a conference call with analysts.

The activist investor Nelson Peltz’s Trian Fund Management had recently urged the company to split its more successful snack division from its sluggish beverage business, to reduce costs and unlock value for shareholders.

PepsiCo contended its current strategy was working and that it has exceeded analysts’ estimates for earnings per share for 11 quarters in a row.

Nooyi said Mountain Dew and Doritos chips were products that tended to be bought together in the United States. Internationally, PepsiCo was promoting its Lays and Pepsi brands jointly through ads and discounts, she said.

“We are pleased with our results for the quarter and year to date particularly given the continued macro challenges we see across the globe,” Nooyi said on the call.

Shares were up 1.3 percent at $95.24 in late morning trading, beating its 2014 record of $94.21, after earlier rising as much as $96.21.

The company raised its full-year growth forecast for earnings per share to 9 percent from 8 percent before taking into account a foreign exchange impact of 4 percentage points due to a robust U.S. dollar.

Indeed, other companies, too, are likely to report the effects of a strong U.S. dollar on their overseas earnings, said Jack Russo, an analyst at Edward Jones.

“The dollar has been making some new highs,” Russo said. “You’re going to see that as a pretty common theme as third quarter earnings start rolling out for any company that’s multinationally based.”

PepsiCo said it earned a net income of $2 billion, or $1.32 a share, in the third quarter ended Sept. 6, up from $1.9 billion, or $1.23 a share, a year earlier.

Earnings per share, excluding charges related to acquisitions and other items, was $1.36. Analysts surveyed by Thomson Reuters were expecting $1.29 a share.

Revenue, excluding the impact of currency translation and changes to PepsiCo’s business, grew 3.1 percent. Overall revenue, which includes currency impacts, was $17.2 billion, up 2 percent from a year earlier.

Sales in PepsiCo’s Frito-Lay segment grew 3 percent while they were flat in the company’s beverages segment. In North America, non-carbonated beverage volume grew slightly while carbonated soft drink volume declined 1.5 percent.

Editing by Chizu Nomiyama and Bernadette Baum