PepsiCo third-quarter profit tops analysts' estimates

Net income in the three months ended Sept 7 rose 0.6% to $1.91 bn from $1.9 bn a year earlier

PepsiCo Inc, the food and beverage company that investor Nelson Peltz wants to split up, posted third-quarter profit that topped analysts' estimates as sales of snacks gained in the US and Latin America.

Net income in the three months ended September 7 rose 0.6 per cent to $1.91 billion, or $1.23 a share, from $1.9 billion, or $1.21, a year earlier, Purchase, New York-based PepsiCo said on Wednesday in a statement. Profit excluding some items was $1.24. The average estimate of 15 analysts surveyed by Bloomberg was $1.17 a share.

PepsiCo's increased snack sales bolster Chief Executive Officer Indra Nooyi's case against Peltz, whose Trian Fund Management LP has pressured her to acquire cookie maker Mondelez International Inc to boost value.

The company's lagging drinks performance in the US may give Peltz ammunition for his other idea - splitting beverages from food.

Total sales rose 1.5 per cent to $16.9 billion. Analysts estimated $17 billion, on average. Revenue from Frito-Lay and other snacks in the Americas rose 7 per cent, excluding the effects of acquisitions, divestitures and foreign-currency fluctuations.

Revenue on that basis in the company's Americas beverages unit slid 1.5 per cent. Sales volume for the business fell 4 per cent, steeper than the 2 per cent decline estimated by John Faucher, an analyst at JPMorgan Chase & Co in New York.

PepsiCo, the world's largest snack-maker and second-largest soft-drink maker, rose 0.9 per cent to $81.33 at 8:30 am in New York. The shares advanced 18 per cent this year through Tuesday, compared with a 19 per cent gain for the Standard & Poor's 500 Index.

Forecast maintained
PepsiCo reiterated it will increase per-share earnings, excluding the effects of currency fluctuations, at least 7 per cent. That would produce profit of about $4.39 a share, up from $4.10 in 2012. The company expects currency fluctuations to reduce its full-year earnings per share by 2 percentage points.

Peltz, who disclosed stakes in PepsiCo and Mondelez in April, said at a conference in New York in July that PepsiCo should acquire Mondelez in an all-stock deal that would be valued at as much as $67.8 billion. Mondelez, the Deerfield, Illinois-based maker of crackers and sweet snacks, had a market value of about $54.4 billion at Tuesday's close. Peltz said that he has met often with Nooyi and that the company didn't favour the idea.

Combined company
PepsiCo has responded that its strategy is working and it is confident in its ability to increase shareholder value as an combined food and beverage company.

"Why break them up?" Warren Buffett, whose Berkshire Hathaway Inc is Coca-Cola's largest shareholder, told CNBC on Wednesday in an interview. "I believe in running a company for the shareholders who are going to stay rather than the ones who are going to leave."

Trian held 12.3 million shares, or 0.8 per cent, of PepsiCo as of June 30. The firm held almost 41 million shares, or 2.3 per cent, of Mondelez.