PepsiCo profit beats estimates; $12 billion buyback planned

(Reuters) - PepsiCo Inc PEP.N on Wednesday reported a higher-than-expected quarterly profit, helped by increased sales at its Frito-Lay snack business, and said it would buy back up to $12 billion in stock by 2018.

The company also raised its annual dividend by 7.3 percent to $2.81 per share and said it expected to return $8.5 billion to $9 billion to shareholders through payouts and buybacks this year.

Activist investor Nelson Peltz’s Trian Fund Management has been pushing Pepsi for about two years to separate its snack division from its beverage business to make two leaner and more entrepreneurial companies. In January, Pepsi said it had elected William Johnson, a Trian advisor and former H.J Heinz Co chief executive officer, to its board.

In a note, Stifel Nicolaus analyst Mark Swartzberg said he had an “improved long-term outlook (on Pepsi) from Trian’s influence on the board.”

Shares of Purchase, New York-based Pepsi were up 2.2 percent at $100.10 in morning trading.

Sales in Pepsi's North American snack business rose 3 percent in the fourth quarter. The business has been a bright spot for the company, helping its stock vastly outperform that of larger rival Coca-Cola Co KO.N in the past year.

Sales in Pepsi’s beverage business, which has been hurt by a long-term decline in soft drink sales in the United States, rose 1 percent, helped by an increase in overall prices and sales of non-carbonated drinks in North America.

“We have momentum,” Chief Financial Officer Hugh Johnston told Reuters, noting the company’s growth with retailers in the United States. “We are absolutely rolling right now.”

Johnston, however, said macroeconomic conditions remained tough and that the stronger dollar was a challenge.

Fourth-quarter net revenue fell about 1 percent to $19.95 billion as the stronger dollar reduced the value of overseas sales, but the results exceeded the analysts’ average estimate of $19.66 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to the company fell to $1.31 billion, or 87 cents per share, from $1.74 billion, or $1.12 per share.

Excluding items such as restructuring charges, earnings were $1.12 per share. Analysts were expecting $1.08.

“Volumes and profits by segment generally came in ahead of expectations,” Jefferies analyst Kevin Grundy said in a note.

Editing by Maju Samuel, Saumyadeb Chakrabarty and Lisa Von Ahn