February 13, 2018 / 11:15 AM / 2 years ago

PepsiCo tops sales estimates as strong snack brands provide boost

(Reuters) - PepsiCo Inc’s (PEP.O) sales topped Wall Street forecasts in the fourth quarter, as higher demand at its snacks business that makes Doritos and Cheetos made up for a decline in sales of sugary drinks.

FILE PHOTO: Cans of Pepsi are pictured at a grocery store in Pasadena, California, U.S., July 11, 2017. REUTERS/Mario Anzuoni/File Photo

As consumers increasingly ditch sodas and sugary drinks, Purchase, New York-based Pepsi has sharpened its focus on snacks as well as healthier beverages.

Indeed, Pepsi rival Dr Pepper Snapple DPS.N agreed to merge with Keurig Green Mountain last month in a $21 billion deal as a way to lower its reliance on soft drinks.

However, asked to comment on the deal by an analyst on Tuesday’s earnings call, PepsiCo Chief Executive Indra Nooyi said: “I’m sure there is some towering strategic logic, but we are still searching for it.”

In the quarter ended Dec. 31, organic sales at Pepsi’s Frito-Lay snacks division rose 5 percent, buoyed by demand for salty snacks and as prices rose 2 percent. Organic sales exclude the impact of currency, acquisitions and divestitures.

The snacks business contributes about 25 percent of overall revenue.

Organic sales at PepsiCo’s North American beverages business that sells Gatorade and Mountain Dew dipped 3 percent.

Total revenue rose slightly to $19.53 billion, topping analysts’ average estimate of $19.39 billion, according to Thomson Reuters I/B/E/S.

PepsiCo recorded a loss of $710 million, reflecting a $2.5 billion one-time charge related to new U.S. tax laws, compared to a year-earlier profit of $1.40 billion.

Excluding one-time items, the company earned $1.31 per share, edging past analysts’ estimates of $1.30.

“We are broadly impressed with Pepsi’s ability to deliver bottom-line results despite the dynamic retail environment and their continued underperformance in the beverages,” Wells Fargo analyst Bonnie Herzog said.

For 2018, the company expects earnings of $5.70 per share, slightly above analysts’ estimates of $5.67. PepsiCo forecast organic revenue to be largely unchanged compared with 2017.

The company also said it would give up to a $1,000 cash bonus to some U.S.-based employees, as it benefits from the tax reform.

Shares of PepsiCo were slightly higher on Tuesday morning.

Reporting by Sangameswaran S and Nivedita Balu in Bengaluru; Editing by Sai Sachin Ravikumar

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