PepsiCo earnings top estimates on strong snack and beverage sales

PepsiCo shares rose slightly Tuesday after the company’s second-quarter earnings topped estimates, as healthier snacks and sparkling water helped fuel sales growth and offset a drag from foreign exchange.

Shares of the company jumped less than 1% in premarket trading. With a market value of $185.8 billion, its stock is up 20% so far this year. The stock of rival Coca-Cola, which has a market value $36 billion higher, has risen only 10% in the same time.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.54, adjusted, vs. $1.50 expected
  • Revenue: $16.449 billion vs. $16.426 billion expected

The comeback of its North American beverage business continued during the second quarter, helped by its Starbucks coffee drinks and water business. Its organic revenue grew by 2.2%. As consumers drink less soda, Pepsi has turned to higher-growth beverage categories instead, releasing energy drinks like Mtn Dew Game Fuel and jumping in on the sparkling water trend with Bubly.

Frito-Lay North America was the strongest performer, reporting 5% organic revenue growth. The Cheetos maker credited sales growth in convenience and dollar stores for the unit’s success. Pepsi has also been expanding its line-up of healthier options through brands like Bare, which makes baked fruit and vegetable snacks.

In its North American Quaker Foods business, its cereal and Aunt Jemima maple syrup returned to growth, giving the segment its strongest quarter of organic revenue in three years.

In addition to adding healthier snack and beverage options, Pepsi’s strategy for sales growth has also focused on investing more in advertising and marketing.

The soda giant reported fiscal second-quarter net income of $2.04 billion, or $1.44 per share, up from $1.82 billion, or $1.28 per share, a year earlier.

Excluding restructuring and impairment charges, tax benefits and other special items, Pepsi earned $1.54 per share, topping the $1.50 per share expected by analysts surveyed by Refinitiv.

Net sales rose 2.2% to $16.44 billion, beating expectations of $16.43 billion. The company said that currency fluctuations negatively impacted its revenue during the quarter.

Overall second-quarter organic revenue was up 4.5%, topping the 4.4% growth expected.

“Our performance for the first half and the progress we are making on our strategic priorities give us increased confidence in achieving the 2019 financial targets we communicated earlier this year,” CEO Ramon Laguarta said in a statement.

In fiscal 2019, the company expects organic revenue to grow by 4% and adjusted earnings per share, assuming constant foreign currency exchange rates, to decline by 1%.

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