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PepsiCo Profit Tops Analysts’ Estimates on Higher Prices

July 25, 2012

PepsiCo Second-Quarter Profit Tops Estimates on Higher Prices

Pepsico CEO Indra Nooyi also is spending more to market brands including Doritos, Mountain Dew and Pepsi-Cola after profit growth slowed last year. Photographer: Paul Taggart/Bloomberg

PepsiCo Inc. (PEP:US), the world’s largest snack-food maker, reported second-quarter profit that fell less than analysts estimated after raising prices.

Profit excluding some items was $1.12 a share, Purchase, New York-based PepsiCo said today in a statement. That exceeded the $1.09 average of 15 estimates compiled by Bloomberg. Net income in the quarter fell 21 percent to $1.49 billion, or 94 cents a share, from $1.89 billion, or $1.17, a year earlier.

Chief Executive Officer Indra Nooyi raised prices 4 percent globally in the quarter on top of a 5.5 percent gain in the first quarter. Nooyi also boosted media spending more than 40 percent in the U.S. to market brands including Doritos, Mountain Dew and Pepsi-Cola after profit growth slowed last year. Drink volume sales grew 1 percent as snacks jumped 6 percent.

“They’re doing what other consumer companies are doing, which is taking price,” Jack Russo, an analyst for Edward Jones & Co. in St. Louis, said today in a telephone interview. “It looks like volumes hung in there.”

PepsiCo, also the world’s second-largest soft-drink maker, rose 2.2 percent to $70.30 at the close in New York. The shares (PEP:US) have gained 6 percent this year.

PepsiCo doesn’t expect surging corn prices caused by the U.S. drought to affect its commodity costs this year because it already had locked in prices with forward contracts, Chief Financial Officer Hugh Johnston said during a call with reporters. He declined to discuss the outlook for 2013.

Sales Volumes

Second-quarter sales fell 2.2 percent to $16.5 billion after the company refranchised bottling operations in China and Mexico.

Food sales volumes jumped 15 percent in Latin America and 19 percent in the Africa, Middle East and Asia unit. Sales volume in the PepsiCo Americas Beverages business (PEP:US) declined 1 percent.

In the U.S., sales of Pepsi brand single-serve beverages at retail outlets such as convenience stores grew “for the first time in a very long time,” PepsiCo Americas Beverages CEO Al Carey said today during a conference call. Those sales indicate efforts to promote the brand are working, he said.

“We are focused on brand building, innovation, execution, productivity and cash return,” Nooyi said today during the conference call. “We expect momentum to continue to build as the year progresses and we are confident in achieving our 2012 goals.”

PepsiCo reiterated its forecast that earnings per share excluding some costs and foreign-currency effects would decline 5 percent this year.

To contact the reporter on this story: Duane D. Stanford in Atlanta at

To contact the editor responsible for this story: Robin Ajello at

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Companies Mentioned

  • PEP
    (PepsiCo Inc)
    • $98.69 USD
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    • 0.16%
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