PepsiCo 1Q Jumps on Snack Sales, Cost Cuts

PepsiCo Products Ahead Of Earnings Data
Susana Gonzalez/Bloomberg via Getty Images
PepsiCo (PEP) reported a stronger-than-expected first-quarter profit as the company slashed costs and sold more snacks around the world.

The company, which makes Frito-Lay, Gatorade, Mountain Dew and Tropicana, said global snack volume rose 2 percent while beverages were even from a year ago. Chief Financial Officer Hugh Johnston said on CNBC that the results show the company's snack and beverage units are "really performing terrifically" together.

Johnston compared the combination to peanut butter and jelly, saying that "snacks and beverages are bought together 55 percent of the time."

His comments seemed to address ongoing calls by activist investor Nelson Peltz of Trian Fund Management for PepsiCo to split up the two units.
Peltz says the company's stronger snack unit is being overshadowed by the underperforming beverage unit, which has long trailed Coca-Cola. PepsiCo has steadfastly rejected the suggestion.

In its closely watched North American beverage unit, PepsiCo said volume was even for the quarter ended March 22. A 1 percent decline in sodas was offset by growth in other drinks. Core revenue rose as the company raised prices. For its Frito-Lay North America unit, volume rose 3 percent.

In Europe, snack and beverage volume each rose by 3 percent. In the unit encompassing Asia, the Middle East and Africa, the company said revenue growth was driven by higher snack volume.

For the quarter, the company earned $1.22 billion, or 79 cents a share. Not including one-time items, it earned 83 cents a share, above the 75 cents a share Wall Street expected.

A year ago, it earned $1.08 billion, or 69 cents a share.

Revenue edged up to $12.62 billion, higher than the $12.39 billion analysts expected.

PepsiCo, based in Purchase, N.Y., stood by its outlook for the year. It expects adjusted earnings per share to grow by 7 percent.

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