Here’s How Pepsi Beat Their Second Quarter Estimates

Jul 11, 2017

Pepsi Co Inc's second-quarter profit beat estimates as the company's strategy of increasing prices of sodas and snack foods in North America paid off.

Sales in its North America beverage unit, Pepsi Co's largest, rose 2 percent in the quarter ended June 17, the company said on Tuesday. While volume sales were flat, net pricing rose 1 percent.

Pepsi Co and rival Coca-Cola Co have focused on selling smaller, higher-margin packs in developed markets and cut back on promoting large discount packs to cope with falling demand for fizzy drinks.

Revenue from Pepsi Co's Frito-Lay North America business rose 3 percent, helped by a 1 percent rise in volume and a 3 percent increase in net pricing.

"I think where the market is today, when we can take pricing, we should take the pricing," Chief Executive Indra Nooyi said on a conference call, adding that the company is working to make its snack portfolio more premium.

Pepsi Co and other processed-food makers are investing heavily to develop premium products that cater to consumers who increasingly seek and are willing to pay more for healthier food options such as unsweetened tea and baked chips.

The quarter was good enough given the challenges many consumer companies are facing, especially carbonated beverage makers as consumption of soft drinks continues to decline, Edward Jones analyst Jack Russo told Reuters.

The company said profit in the quarter was also helped by the sale of its 4.5 percent stake in British bottler Britvic Plc for an undisclosed amount.

Pepsi Co raised its adjusted profit forecast for 2017 to $5.13 per share from $5.09, citing lower impact from unfavorable foreign exchange.

"For the first time since 2013, Pepsi did not raise their underlying earnings growth assumption for the year following Q2 earnings," JP Morgan analysts said in a client note.

Pepsi Co's shares were down about 1 percent at $112.99 in morning trading on Tuesday.

Net income attributable to Pepsi Co rose 5 percent to $2.11 billion, or $1.46 per share.

Excluding items, the company earned $1.44 per share, beating the average analyst estimate of $1.40, according to Thomson Reuters I/B/E/S.

Revenue rose 2.1 percent to $15.71 billion. Analysts on average had expected revenue of $15.60 billion.

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