PepsiCo third quarter profit tops estimates on higher prices

PepsiCo, the world's largest snack maker, posted third-quarter profit that topped analysts' estimates and boosted its earnings forecast for the year as the company raised prices on drinks and food products. Net income rose five per cent to $2 billion, or $1.32 a share, from $1.91 billion, or $1.23, a year earlier, the Purchase, New York-based company said on Thursday. Excluding some items, profit was $1.36 a share. The average of 19 analysts' estimates compiled by Bloomberg was $1.29.

Chief Executive Officer Indra Nooyi has been cutting costs and increasing prices to improve profit and fend off activist investor Nelson Peltz, who's been pressing PepsiCo to split up the snack and beverage businesses. Nooyi and PepsiCo directors have rejected that idea, saying the current structure benefits shareholders. Third-quarter profit was helped by a three per cent increase in effective net pricing.

"We continued to show that the combination of beverages and snack foods works really well together," Chief Financial Officer Hugh Johnston said on Thursday in an interview.

PepsiCo said it now expected a nine per cent increase in core constant-currency earnings per share this year, up from an an earlier forecast of eight per cent growth.

The shares rose 1.7 percent to $95.51 at 7:13 a.m. in early trading in New York. PepsiCo advanced 13 percent this year through yesterday, compared with a 6.5 percent gain for the Standard & Poor's 500 Index.

Pricing Gains
Revenue in PepsiCo's Latin America Foods division rose 6.3 percent to $2.18 billion, while sales in the company's Asia, the Middle East and Africa unit climbed 11 percent to $1.78 billion.

Sales from the Frito-Lay North American division increased 3 percent to $3.52 billion. European sales dropped 1.4 percent to $3.76 billion.

Revenue from PepsiCo's largest unit, Americas Beverages, slid 0.4 percent to $5.38 billion.

PepsiCo is among beverage makers struggling to keep consumers from abandoning soft drinks because of high calories and perceived health risks posed by artificial sweeteners.

The company last week introduced a new cola that uses the natural sweetener stevia to cut the calories by more than a third from its conventional sodas. Pepsi True, which will be sold exclusively on Amazon.com starting later this month, will have 60 calories per 7.5 ounce can. Retail sales of the drink, which also uses real sugar, may begin in 2015.

PepsiCo joined with rivals in setting a goal of cutting the beverage calories that Americans consume by 20 percent in the next decade, a pledge the company and its rivals made at the Clinton Global Initiative Annual Meeting in New York last month.