AP News, February 8th, 2007
PepsiCo Inc., the snack and beverage maker, said Thursday that its fourth-quarter profit climbed 61 percent led by strong performances from its international and Frito-Lay divisions.
Profit for the three months ended Dec. 30 grew to $1.78 billion, or $1.06 per share, from $1.1 billion, or 65 cents per share, during the same period last year.
Revenue edged up 2.8 percent to $10.38 billion from $10.1 billion a year ago.
Excluding one-time charges from taxes and restructuring, the company reported earnings per share of 72 cents.
Analysts polled by Thomson Financial had forecast earnings of 72 cents per share on revenue of $10.38 billion. Consensus estimates usually exclude one-time items.
The company also raised its forecast for 2007 earnings per share by 2 cents to $3.30 and said it would buy back shares worth $3.3 billion. Analysts expect earnings of $3.31 a share for 2007.
"This result was broadly positive," Banc of America Securities analyst Bryan Spillane wrote in a note to investors.
Spillane said the performance of Frito-Lay North America picked up slack from PepsiCo Beverages North America. "This, plus a reasonable outlook, should assuage some investor concerns surrounding earnings power in 2007, which should drive the stock higher," he wrote.
Nonetheless, PepsiCo shares fell 62 cents to $63.88 in morning trading on the New York Stock Exchange.
In addition to Frito-Lay and Pepsi beverages, PepsiCo owns the Gatorade sports drinks, Tropicana juices and Quaker foods businesses.
Operating profit at PepsiCo International climbed 26 percent in the quarter on revenue gains of 16 percent in the quarter as the snacks division posted a 9 percent volume gain and drinks volume rose 7 percent. Sales of both carbonated and non-carbonated beverages grew abroad.
"Our international business performed particularly well, delivering double-digit revenue and operating profit growth," Chief Executive Indra Nooyi said in a statement. "And Frito-Lay North America delivered robust sales and profit results."
Sales at Frito-Lay increased 7 percent, led by sales of snacks such as Doritos, Sunchips, Tostitos, Lay's and Cheetos. Operating profit was up 8 percent on 3 percent volume growth.
In the PepsiCo Beverages North America division, volume rose 0.5 percent mainly driven by sales of non-carbonated beverages despite weakness in Gatorade, which suffered supply chain troubles, and Tropicana orange juice, which has been affected by a price hike. PepsiCo has raised orange juice prices to offset higher costs due to a historically smaller Florida orange crop this year.
Sales of carbonated soft drinks in the U.S. fell, reflected in a 2 percent decline in net revenue and a 9 percent drop in operating profit in the quarter. Consumption of the company's signature Pepsi cola and of Mountain Dew dropped by low single-digit percentages while Sierra Mist grew in the high single digits.
Under Nooyi, the Purchase, N.Y.-based company has been expanding its better-for-you food and drink offerings. In the quarter, PepsiCo bought Izze Beverage Co., a maker of natural sparkling juices; Naked Juice Co., which produces organic soy milk and vegetable juice, and snack maker Bluebird Foods.
Nooyi took over as CEO on Oct. 1 and was elected earlier this week as chairwoman, effective at the May 2 retirement of former chief executive Steven Reinemund.
For the full year, PepsiCo reported profit rose 38 percent to $5.64 billion, or $3.34 per share, from $4.08 billion, or $2.39 a share, in 2005. Revenue in 2006 rose 7.9 percent to $35.14 billion from $32.56 billion.
