Price increases help PepsiCo profit beat expectations

Thu Apr 18, 2013 12:37pm EDT
 
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By Martinne Geller

(Reuters) - PepsiCo Inc (PEP.N: Quote) posted better-than-expected quarterly earnings on Thursday, as price increases helped margins, sending its shares up 4 percent.

The maker of Pepsi-Cola, Tropicana juice and Frito-Lay snacks kept its full-year forecast unchanged, however, saying it may reinvest in its business and adjust pricing moving forward.

Still, the strong results are a validation of the turnaround strategy of Indra Nooyi, who led the company through a "transition year" in 2012, during which it sacrificed profits to invest in marketing and innovation.

"The business momentum continues to look solid, as PepsiCo delivered its first earnings growth quarter in over a year," JP Morgan analyst John Faucher said, noting that the company's stock had been weaker than its peers in the past few days.

Despite the better-than-expected first quarter, Chief Financial Officer Hugh Johnston told analysts not to increase their 2013 estimates, citing a "volatile world" and a higher tax rate moving forward. In addition, soda prices may not stay as high as they were in the first quarter.

PLAYING THE GAME

PepsiCo, based in Purchase, New York, decided to raise prices on some of its drinks more than its rivals during the quarter, a move that predictably boosted profits but hurt sales.

The Americas drink business saw operating profit rise 8 percent while revenue fell 1 percent.   Continued...

 
Cases of Pepsi are displayed for sale in Carlsbad, California February 7, 2012. PepsiCo Inc. will report their earnings February 9. REUTERS/Mike Blake