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PepsiCo shares up as Q1 profit tops views

PepsiCo shares up as Q1 profit tops views

PepsiCo (NYSE:PEP) shares rose more than 5 per cent on Thursday after first quarter earnings beat analyst expectations on price increases, despite a decline on the year-ago period.

The manufacturer of such brands as Gatorade and Frito Lay snacks said for the quarter that ended March 23 net income attributable to PepsiCo came in at US$1.08 billion, or 69 cents per share, compared to US$1.13 billion, or 71 cents a share a year ago. 

Core earnings, which exclude losses from the Venezuelan currency devaluation, restructuring charges and other items, were 77 cents per share in the latest period, topping analyst views of 71 cents a share, according to Thomson Reuters

Net revenue reached US$12.58 billion, a one per cent uptick on the year-ago figure of US$12.43 billion. 

This growth, a product both of volume growth and upped prices as the company moves away from discount-driven sales to sell its products at consistently higher price points, was offset by such factors as the Latin American side taking a hit on the devaluation of the Venezuelan currency. 

Structural changes, primarily refranchising in China, negatively impacted net revenue performance by 3 percentage points, the company said, while foreign exchange had a 0.5-percentage-point unfavorable impact in the quarter. 

The company said organic revenue grew 4.4 per cent. 

Selling, general and administrative expenses increased to US$5.07 billion for the quarter, a six per cent rise on last year’s figures of US$4.79 billion.

"We delivered solid organic revenue growth and double-digit core EPS growth in the first quarter, driven by our balanced food and beverage product and global geographic portfolio," said chairman and CEO Indra Nooyi in the statement. 

"We are driving increased marketplace execution and making higher investments in marketing and innovation to drive future growth. In the first quarter, our advertising and marketing expense increased by 11 percent, while our core operating margin increased 80 basis points."

The PepsiCo Americas Foods unit saw organic revenue grow 6 per cent in the quarter driven by growth in all divisions, including Frito-Lay North America, Quaker Foods North America and Latin America Foods. Reported net revenue increased 5 per cent in the quarter.

The Americas Beverages (PAB) unit saw organic revenue come in flat with the prior year period, as volume declines and the negative impact of shipment timings were offset by effective net pricing. Reported net revenue declined 1 per cent.

In the Asia, Middle East & Africa region, reported revenue declined 14 per cent due mainly to the refranchising of bottling operations in China. Excluding these effects and some other items, revenue rose 15 per cent driven by volume growth in snacks and beverages.

In Europe, reported revenue grew 5 per cent, while organic revenue rose 4 per cent, reflecting volume growth and positive pricing effects. 

The company also reported that it stood by its previous forecast of 7 per cent core earnings growth versus its fiscal 2012 adjusted profit of $4.10 per share. It also said it expects to return a total of $6.4 billion to shareholders this year through dividends of about $3.4 billion and share buybacks of roughly $3.0 billion.

On the back of the release this morning, PepsiCo shares were up US$3.35 at $82.20, a rise of more than 4.3 per cent. 

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