The Atlanta Journal-Constitution
PepsiCo tops 3Q forecasts but hedges on outlook
PURCHASE, N.Y. — PepsiCo reported better-than-expected third-quarter earnings and revenue, but its shares edged lower Tuesday after the company warned of the effects that the strong dollar will have on its performance for the rest of the year.
The company had a profit of $2.5 billion, or $1.75 per share. Earnings, adjusted for one-time gains and costs, were $1.59 per share, or 3 cents better than Wall Street was expecting, according to a survey by Zacks Investment Research.
Revenue of $16.49 billion also topped forecasts. PepsiCo Inc. increased its revenue outlook for the year, saying it now expects to see a 3 percent increase from 2017, up from its earlier forecast of 2.3 percent. But Pepsi also said it expects a 1 percentage-point headwind from currency rates.
Revenue rose 2 percent in Pepsi’s largest segment, North American beverages. It was the biggest increase that unit has seen in eight quarters, Pepsi CEO Indra Nooyi said on a conference call with investors. One highlight was Bubly, a flavored sparkling water introduced in February that’s expected to notch $100 million in sales this year.
But the revenue increase was offset by higher transportation and aluminum costs, increased marketing spending and other costs. Operating profit was down 14 percent to $703 million.
Pepsi Chief Financial Officer Hugh Johnston said price increases in September should improve profits in the fourth quarter.
Nooyi said Pepsi turned in a strong performance internationally, with 10 percent adjusted revenue growth in those markets. Pepsi’s operating profit jumped 34 percent to $311 million in its Asia, Middle East and Africa division.
Nooyi is retiring today after 12 years as Pepsi’s CEO and 24 years at the company. Ramon Laguarta, a 22-year veteran of the company and its current president, will be Pepsi’s new CEO.