PEP PepsiCo Inc

By Mike Esterl 

PepsiCo Inc. raised its 2016 profit outlook after revenue surged in key overseas markets like China and as the U.S. beverage business picked up steam in the third quarter.

The maker of Lay's potato chips and Tropicana juice said Thursday it now expects adjusted earnings per share to grow 10% instead of 9% this year, the second straight quarter it has raised guidance as a cost-cutting push also helped lift the bottom line.

Chief Executive Indra Nooyi said the global economy remains "troubled," but the snack and beverage giant is "cautiously optimistic" about developing and emerging markets after seeing recent improvement.

"Whether they last at this point we don't know, but they are looking pretty good," Ms. Nooyi told analysts on an earnings conference call.

Organic revenue rose 8% in developing and emerging markets after stripping out currency swings in the quarter ended Sept. 3. That included 11% growth in China and Mexico, while revenue rose 7% in Russia, where "the consumer economy is starting to come back a little bit," Chief Financial Officer Hugh Johnston said in an interview.

The Purchase, N.Y. company generates nearly half its sales abroad with everyday staples like soda, potato chips and juice, making it an easy proxy for consumer spending.

PepsiCo's share price was 0.9% higher at $108.32 in morning trade on the New York Stock Exchange after profit and revenue were both seen to have topped Wall Street expectations.

The company also got a boost from is North American beverage unit, where volumes rose 2% in the third quarter after being flat in the first half. Executives pointed to strong growth in noncarbonated beverages, including Naked juice, Pure Leaf tea and Propel electrolyte-enhanced water. That is offsetting declines in sodas, particularly Diet Pepsi, as consumers avoid artificial sweeteners.

PepsiCo said gross operating margins expanded for the 15th straight quarter, putting it on track to book at least $1 billion in productivity gains this year as part of a five-year, $5 billion cost-cutting plan.

Snack and beverage volumes rose 3% and 2%, respectively. Organic revenue grew 4.2% after stripping out the impact of weaker foreign currencies and the troubled Venezuelan business, which the company removed from its balance sheet last year.

PepsiCo now expects 2016 earnings per share to rise to $4.78 in 2016 from $4.57 last year, up from its July estimate of $4.71. It forecasts a negative impact of 2% from the deconsolidation of Venezuelan operations and a negative impact of 3% from foreign exchange.

Third-quarter profit more than tripled to $1.99 billion from $533 million a year earlier. Results in the year-earlier quarter were weighed down by a $1.36 billion Venezuelan impairment charge.

Revenue declined 1.9% to $16.03 billion from $16.33 billion a year earlier. Weaker foreign currencies and the Venezuelan deconsolidation each had a negative impact of 3 percentage points in the most recent quarter.

Third-quarter adjusted earnings per share were $1.40, beating Wall Street's expectation of $1.32, according to a Thomson Reuters poll of analyst estimates. Revenue was also roughly $200 million higher than analyst forecasts.

Write to Mike Esterl at mike.esterl@wsj.com

(END) Dow Jones Newswires

September 29, 2016 11:35 ET (15:35 GMT)

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