Pepsi sales fall but beat estimates

P epsiCo

Inc reported better-than-expected quarterly net revenue and profit on Thursday, helped by higher demand in North America for its line-up of beverages and snacks with fewer calories and more natural ingredients.

The company also raised its 2016 adjusted profit forecast.

PepsiCo and other processed-food companies are investing heavily to develop products to meet the changing tastes of consumers, who are increasingly seeking healthier options.

PepsiCo said that about 45% of its net revenue now came from “guilt-free” products — beverages that have fewer than 70 calories per 12 ounces and snacks that have lower amounts of salt and saturated fat.

PepsiCo’s healthier brands include Propel flavoured-water, Naked Cold Pressed juice and its “Simply” line of foods featuring products such as organic salsa and chips made from black beans, which have helped drive sales in recent quarters.

The company said it was expanding its offerings of baked chips, which include Baked Lays and Baked Cheetos, to more markets outside the United States.

“Consumers want healthy and these companies have to give them what they want,” Edward Jones analyst Jack Russo said.

PepsiCo’s businesses in Russia, China and India improved in the third quarter, while Western Europe “is not getting worse,” chief executive Indra Nooyi said on a conference call.

North America is the company’s biggest market, accounting for about 60% of revenue in 2015.

However, the company’s revenue fell for the eighth straight quarter, hurt by high inflation in some Latin American economies such as Venezuela and Argentina and unfavorable exchange rates.

Net revenue fell about 2% to $16.03 billion in the third quarter, but beat the average analyst estimate of $15.83 billion, according to Thomson Reuters I/B/E/S.

Revenue in the North America beverages unit, the company’s biggest business, rose about 3% to $5.52 billion.

Net income attributable to PepsiCo rose to $1.99 billion, or $1.37 per share, in the three months ended Sept 3 from $533 million, or 36 cents per share, a year earlier, when the company recorded a $1.36 billion impairment charge on its Venezuela operations.

It raised full-year adjusted profit forecast by seven cents to $4.78 per share.