PepsiCo Tops Estimates on Earnings

On Thursday, PepsiCo posted earnings for the first quarter that beat the Street, but its core beverage business of North America continued struggling.

PepsiCo earnings per share reached 96 cents on an adjusted basis, while forecasters on Wall Street expected 93 cents. Revenue for the three-month period reached $12.56 billion versus analysts’ expectations of $12.4 billion.

However, its North American sector continues with its struggle to work through some issues, said CEO Indra Nooyi during an earnings call.

Nooyi added that the drive is despite a moderate increase in media on its trademark Pepsi the last three years, its share had dropped dramatically in relation to its key competitor who has stepped up significantly its media spending on its colas the last two years.

Pepsi, to address that, is planning to increase its spending on it top cola, and make improvements on brand communications while launching its ad campaign Pepsi Generations.

Coca-Cola continues pouring dollars into innovating its lineup of classic colas while also launching new products. In January, it launched a revamp of Diet Coke that was aimed at millennials and that helped it to return to positive volume growth for its North America division.

In the meantime, Pepsi has worked on turning around Gatorade its once highly popular brand and said it is seeing an improvement in sales performance as well as trajectories. PepsiCo also recently launched a Gatorade Zero version that does not have carbohydrates.

Pepsi has struggled to balance the support it gives to newer drinks while not forgetting about its profit-making yet slower growth of core carbonated drinks that include Pepsi. It highlighted several on-trend and healthier drink launches Thursday, including Drinkfinity an at-home drink system, and Lipton Iced Tea with a Splash of Juice.

During the quarter that ended on March 24, PepsiCo’s net income ended at $1.34 billion equal to 94 cents per share, compared to last year during the same period of $1.32 billion and 91 cents per share.

Excluding special items, the company ended the quarter with earnings of 96 cents per share. Total revenue increased by 4.3% ending the quarter at $12.56 billion which beat estimates of $12.39 billion.

Organic growth in revenue, which eliminates currency exchange impact, increased 2.3%.

On Thursday, PepsiCo said it was evaluating the options it has for the company’s bottling unit, including a possible spin off. No decisions have been made yet however.

Its Frito-Lay North America snack division continues its growth reporting a 3% sales growth.