PepsiCo Boosts Its Profit Outlook -- WSJ
September 30 2016 - 3:03AM
Dow Jones News
Revenue rie in key overseas markets, as the U.S. beverage
business improved
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 30, 2016 02:48 ET (06:48 GMT)
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