Pepsi Pops on Strong Earnings and Sales Growth Led By Snack Foods, Emerging Markets

Michael Teague  |

PepsiCo's (PEP) earnings report indicated that worldwide sales for snack foods was up 4 percent, while sales for beverages were up 3 percent, with over one third of the company’s revenue coming from emerging markets.

Shares for Pepsi were up 3.68 percent to $81.75 after the company reported that during the first quarter of 2013, it earned $1.08 billion, or $0.69 cents per share, on $12.58 billion in revenue. While net income was down from the prior-year period, when the company made $1.13 billion, or $0.71 cents per share, revenues beat analyst predictions of $12.54 billion.

Profits increase dramatically, however, when excluding Venuela’s currency devaluation along with other items such as the company’s having to refranchise its business in China. Excluding those one-time events, the company actually earned $0.77 cents per share, well above the $0.70 cents per share previously expected by analysts.

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Additionally, price increases in North America were a counterweight to a drop in beverage sales. Snacks also helped out, with strong performances from the company’s Sabra brand hummus and Stacy’s brand pita chips, as well as the long-time staples Doritos and Lay’s.

The company has spent a good deal of money and effort over the past year to showcase namesake product, Pepsi cola, including a $50 million deal with pop music diva Beyonce Knowles. Still, the company indicated that it is losing its share of the soda market as a result of both increased competition from Coca Cola (KO), as well as an increasing trend among Americans to opt for other types of beverages that are perceived as being healthier than soda.

Still, the company hasn’t given up on its soda, with CEO Indra Nooyi saying in a conference call that Pepsi is working on a natural sweetener mix for its soda products that would have the ability to “potentially alter the trajectory of our cola business in a meaningful way”.

Pepsi also said that it is counting on $900 million in savings this year from cost cutting measures, including, perhaps, something along the lines of what rival Coca-Cola is doing by giving up distribution to its independent bottlers in exchange for franchising fees.

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