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PepsiCo Reports Profit Up 16%; Backs Forecast For Year

Reuters
Wednesday, 25 Apr 2007 | 11:37 AM ET
Pepsi
Seth Perlman
Pepsi

Soft drinks and snacks maker PepsiCo said Wednesday its first-quarter earnings rose 16%, thanks to strength in snacks like Doritos and SunChips and its non-carbonated beverage business.

The company also reaffirmed its earnings forecast for the year.

The world's No. 2 soft drink company said net income for the first quarter rose to $1.10 billion, or 65 cents per share, from $947 million, or 56 cents a share, a year earlier.

Analysts on average were expecting 61 cents a share, according to Reuters Estimates.

Morgan Stanley analyst William Pecoriello said that underlying profit growth added just under 1 cent a share to the earnings beat, while lower expense and a lower tax rate each contributed just under 2 cents a share.

It was an "overall strong quality quarter even after excluding the benefits of lower tax rate and lower expense," Pecoriello wrote in a research note. "International was the star."

Pepsi's quarterly net revenue rose 9% to $7.35 billion from $6.72 billion, as the international division's revenue rose 19%.

Pepsi's diverse portfolio -- which includes Gatorade sports drinks, Quaker Oatmeal and Rice-A-Roni side dishes -- has helped it withstand an industrywide slowdown in soft drinks due to growing health consciousness, whereas Coca-Cola Co. has relied on its presence around the world, especially in emerging markets where people still eagerly drink soft drinks.

But in the latest quarter PepsiCo's international segment had a 13% increase in sales volume of snacks, helped by acquisitions and strength in Russia, Venezuela, South Africa and Turkey. International beverage volume grew 7%.

In North America, higher sales of oatmeal helped the Quaker Foods segment see volume and revenue each rise 5%. Frito Lay volume rose 3.5%, driven by strength of Doritos and SunChips, the company said.

The North American beverage business, which was a sore spot for Coke, which reported earnings last week, saw volume rise 1%, driven by higher sales of noncarbonated drinks such as Aquafina water and Lipton tea. Morgan Stanley's Pecoriello said he had been expecting a 1% decline in volume.

PepsiCo, based in Purchase, New York, affirmed its outlook for the full year, saying it expects earnings per share of at least $3.30, cash from operations of at least $7 billion and net capital spending of $2.6 billion.

Analysts on average are expecting $3.32 a share, excluding items, on revenue of $37.88 billion, according to Reuters Estimates.

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