The joy of Pepsi is real

February 11, 2016 09:02 AM

PepsiCo Inc reported better-than-expected quarterly net revenue as higher sales of snacks and beverages in North America helped reduce the impact of a strong dollar.

PepsiCo increased its annual dividend to $3.01 per share from $2.81 and said it would return about $7 billion to shareholders this year, with about $3 billion through buybacks.

However, the company forecast 2016 adjusted earnings below analysts' estimates, citing a strong dollar and the exclusion of its Venezuelan business from its financial statements.

Revenue from PepsiCo's North American beverages business, which the company started breaking out from the third quarter, rose 2% in the fourth quarter ended Dec. 26, accounting for 31.5% of total revenue.

PepsiCo has been introducing beverages with less sugar and more natural ingredients as consumers in North America, its biggest market, become more calorie-conscious and opt for products that are perceived to be healthier.

Wells Fargo Securities said in a pre-earnings note that its research showed that PepsiCo's beverage sales in U.S. convenience stores rose 3.2% in the quarter, helped by aggressive pricing and "solid" sales of Gatorade and Starbucks  ready-to-drink coffee, which Pepsi distributes.

Traditional rival Coca-Cola Co reported better-than-expected quarterly revenue and profit on Tuesday, helped by sales of smaller cans and bottles, aggressive cost-cutting and lower commodity costs.

Revenue from PepsiCo's snacks business, which includes Frito-lay and Doritos chips, also rose 2% in North America.

Frito-Lay North America and the North America beverage business were the only two units to report higher revenue in the quarter.

Net income attributable to PepsiCo rose to $1.72 billion, or $1.17 per share in the period, from $1.31 billion, or 87 cents per share, a year earlier.

Excluding items, the company earned $1.06 per share.

Net revenue fell 7% to $18.59 billion.

Analysts on average had expected earnings of $1.06 per share on net revenue of $18.51 billion, according to Thomson Reuters I/B/E/S.

PepsiCo forecast 2016 adjusted earnings of $4.66 per share, short of the average analyst estimate of $4.76.

The company said it expected 2016 organic revenue growth of about 4%. It said foreign exchange translation would likely negatively impact reported net revenue growth by percentage points.

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Sruthi Ramakrishnan, Reuters