Growth in quarter leads PepsiCo to raise guidance

by Jeff Gelski
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PURCHASE, N.Y. — PepsiCo Inc. increased its full-year earnings guidance after reporting 15% growth in earnings per share for the second quarter ended June 16. Second-quarter net income of $1.56 billion, equal to 94c per share on the common stock, compared with $1.38 billion, or 81c per share, in the previous year’s second quarter. Purchase-based PepsiCo now expects full-year earnings per share of at least $3.35. Previously the guidance was at least $3.30 per share.

"This change reflects a number of factors for the second half of the year: an increase in long-term research and development expenditures, investment spending to sustain our growth in key segments and geographies, and tax rates in the second half that will be above our average tax rate for the year, which we’re now projecting at 27.3%," said Indra Nooyi, chairman and chief executive officer of PepsiCo, when second-quarter results were given July 24.

Second-quarter net revenues increased 10% to $9.61 billion from $8.71 billion. For the first half of the year, PepsiCo posted net income of $2.65 billion, or $1.59 per share, which was up from $2.32 billion, or $1.37 per share. First-half net revenues of $16.96 billion compared with $15.43 billion in the previous year’s first half.

In the second quarter all the lines of PepsiCo’s business performed at or above expectations, Ms. Nooyi said.

Operating profit for Frito-Lay North America increased 8% to $682 million from $634 million. Revenues jumped 6% to $2.72 billion from $2.57 billion. Doritos, SunChips, multipacks, dips and Quaker rice snacks posted double-digit revenue growth.

Operating profit for PepsiCo Beverages North America rose 4% to $650 million from $626 million, and revenues were up 5% to $2.63 billion from $2.51 billion. Non-carbonated beverage volume grew 3% led by Lipton ready-to-drink teas, up more than 30%, and Aquafina, which had high single-digit growth. Carbonated soft drink volume declined 4%.

Operating profit for Quaker Foods North America increased 2% to $117 million from $115 million. Net revenues rose 4% to $390 million from $373 million. Operating profit for PepsiCo International leaped 18% to $683 million from $577 million. Net revenues also were up 18%, going to $3.87 billion from $3.27 billion. Snacks volume grew 9% internationally, and beverage volume increased 8% internationally.

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