Coverage: PepsiCo Q2 profits beat expectations

PepsiCo’s second-quarter earnings beat analyst estimates thanks to healthy snacks and sparkling water sales.

Reuters’ Nivedita Balu had the news:

PepsiCo Inc (PEP.O) beat analysts’ estimates for quarterly revenue on Tuesday, as the beverage and snack maker benefited from adding healthier snacks, sparkling waters and juices to cater to consumers looking beyond sodas and chips.

Net revenue rose 2.2% to $16.45 billion in the second quarter ended June 15 from a year earlier.

Analysts on average had expected revenue of $16.43 billion, according to IBES data from Refinitiv.

Net income attributable to the company rose to $2.04 billion, or $1.44 per share, from $1.82 billion, or $1.28 per share, a year earlier.

Amelia Lucas from CNBC quoted the company’s CEO as saying in a statement:

“Our performance for the first half and the progress we are making on our strategic priorities give us increased confidence in achieving the 2019 financial targets we communicated earlier this year,” CEO Ramon Laguarta said in a statement.

In fiscal 2019, the company expects organic revenue to grow by 4% and adjusted earnings per share, assuming constant foreign currency exchange rates, to decline by 1%.

Second-quarter organic revenue was up 4.5%, topping the 4.4% growth expected.

Frito-Lay North America was the strongest performer, reporting 5% organic revenue growth. The Cheetos maker credited sales growth in convenience and dollar stores for the unit’s success.

Bloomberg’s Craig Giammona listed the reasons for the improvement:

• PepsiCo has boosted its marketing spending as it tries to drive growth in an increasingly competitive food-and-beverage market, particularly in the U.S. As soda consumption declines, the battle for beverage dollars is heating up again with long-time rival Coca-Cola Co.
• The company has benefited from higher prices on its chips and snacks, which have helped lift revenue even as it has been difficult to sustain volume growth, particularly in the key North American beverage unit.
• PepsiCo has been cutting costs, including reducing head count, as it tries to increase profit amid higher commodity costs and headwinds from foreign currency.