PepsiCo profit rises as snacks sales rise

Reuters With CNBC
PepsiCo's reports strong Q1 beat
PepsiCo's reports strong Q1 beat

PepsiCo on Thursday reported a higher quarterly profit, lifted by sales gains in its snacks business and double-digit growth in emerging economies.

After the earnings announcement, the company's shares climbed in premarket trading. (Click here to get the latest quote.)

During an interview with CNBC after posting earnings, PepsiCo CFO Hugh Johnston attributed the better-than-expected earnings to the rapid growth of shoppers buying both snacks and drinks made under the Pepsi banner, contending that shoppers buy them together more often than lunchbox staples peanut butter and jelly.

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The maker of Pepsi-Cola, Frito-Lay snacks, and Tropicana juice, said net income was $1.22 billion, or 79 cents per share, in the first quarter, up from $1.08 billion, or 69 cents per share a year earlier. The beverage giant posted first-quarter earnings excluding items of 83 cents per share.

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Revenue, excluding the impact of currency translation and changes to PepsiCo's business, rose 4 percent. Overall revenue was $12.62 billion, above the $12.43 billion Wall Street was expecting, according to Thomson Reuters I/B/E.S.

Appearing on CNBC's "Squawk Box," Johnston said the positive earnings report proves the company's worth as a good bet in a volatile stock market. The company has come under pressure from activist investor Nelson Peltz, who wants to split up the snack and beverage behemoth as sugary drinks lose favor in the United States.

Johnston wouldn't comment directly about Peltz' activism, but questioned why someone would want to disrupt a company with strong earnings growth.

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"All of our investors will be pleased, and honestly as investors look for defensive places to put money in right now, PepsiCO is a terrific investment in that regard and I don't know why anyone would want to disrupt that," Johnston said during an interview with CNBC.

Emerging economies in Russia, Brazil, and India brought in double-digit growth for the beverage company, Johnston said. Those markets don't buy snacks and beverages together as often as U.S. shoppers, Johnston said, but a booming beverage business there bodes well for Pepsi's many snack brands, such as Doritos and Lay's chips.

"It's different around the world," Johnston said. "If you look at developing and emerging markets, the beverages tend to develop first, and then snacks really carry on from what was a bigger beverage business that snacks wouldn't otherwise benefit from."

Pepsi's results come amid a decline in demand for sugary, carbonated drinks that have flattened the domestic profit of competitor Coca-Cola. Meanwhile, Peltz has pressured Pepsi to sever its snack and drink businesses. For its part, Pepsi has dismissed the campaign as a "costly distraction" that would cut into shareholder value.

By Reuters. CNBC's Jeff Morganteen contributed to this report.