Bloomberg News

PepsiCo Quarterly Profit Rises 13% as Peltz Pushes for Split

April 17, 2014

PepsiCo Bottles are Arranged at a Store in Mexico City

An employee arranges PepsiCo Inc. soft drink bottles on display at a store in Mexico City. Photographer: Susana Gonzalez/Bloomberg

PepsiCo Inc. (PEP:US) Chief Executive Officer Indra Nooyi has earned the company a reprieve for at least another quarter.

The owner of Gatorade and Lays boosted profit more than analysts estimated in the first quarter and increased revenue for snacks and beverages globally, excluding the negative impact from currency fluctuation. The results will help Purchase, New York-based PepsiCo fend off calls by activist investor Nelson Peltz to separate its dominant snacks business from the struggling North American beverages unit.

Nooyi and the company’s board have stood firm against relentless pressure from Peltz, who wants to split PepsiCo to slash costs, allow more focused marketing and spur faster growth. Nooyi has responded with a pledge to improve performance and cut $5 billion in costs over five years starting in 2015, extending a plan already under way.

“This aids management’s defense of its one-co decision but also think management remains in an active conflict with shareholders,” Mark Swartzberg, an analyst for Stifel Financial Corp. in New York, said in a note today.

Peltz, whose Trian Fund Management LP owns 0.8 percent of PepsiCo, last month called on directors to meet shareholders without Nooyi and her management team. He also demanded that the company consolidate four headquarters facilities into two and disclose returns from bottler acquisitions.

Organic revenue, which strips out currency fluctuation and the effect of structural changes, rose 5 percent for snacks globally and 3 percent for beverages, the company said today in a statement. Profit excluding some items totaled 83 cents a share. The average of 16 analysts’ estimates compiled by Bloomberg was 75 cents.

Shares Rise

“Investors are likely to be very happy with what they are seeing out of PepsiCo right now,” Chief Financial Officer Hugh Johnston said in an interview. “I don’t know why you’d want to disrupt it.”

PepsiCo rose (PEP:US) 0.9 percent to $85.55 at the close in New York. The shares have increased 3.1 percent this year, while the Standard & Poor’s 500 Index added less than 1 percent.

Revenue advanced 0.3 percent $12.6 billion, beating the $12.4 billion average of analysts’ estimates (PEP:US). Net income increased 13 percent to $1.22 billion, or 79 cents a share, from $1.08 billion, or 69 cents, a year earlier.

PepsiCo Americas Beverages volume was little changed in the quarter, an improvement from a 3 percent decline a year ago. A 1 percent soft drink decline was offset in part by a 2 percent increase in non-carbonated beverages in North America. In Latin America, declines in Mexico spurred by new soft drink taxes depressed volume by 1 percent.

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editors responsible for this story: Kevin Orland at korland@bloomberg.net James Callan


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Companies Mentioned

  • PEP
    (PepsiCo Inc)
    • $91.08 USD
    • -0.47
    • -0.52%
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