PepsiCo profit beats expectations on North American demand; stock rises

Thu Jul 7, 2016 10:33am EDT
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By Melissa Fares and Sruthi Ramakrishnan

(Reuters) - PepsiCo Inc (PEP.N: Quote) reported a better-than-expected profit for the second quarter on Thursday, buoyed by lower raw material costs and higher demand for Frito-Lay snacks and new beverages in North America, lifting shares to a record in early trading.

The maker of Pepsi and Gatorade also boosted its forecast for adjusted profit for the year.

PepsiCo's shares rose to an all-time high of $109, before giving up some gains to trade at $108.61 in morning trading on the New York Stock Exchange.

Drinks like Propel flavored water and Naked Cold Pressed juice, Smartfood Popcorn and "Simply" brand snacks helped drive sales, the company said.

PepsiCo and other consumer companies are spending more to develop new products to meet the changing tastes of consumers who are increasingly seeking healthier options.

PepsiCo doubled its research and development spending over the last 5 years and new products now account for 9 percent of PepsiCo's revenue, up from 5 percent in past years.

"The North American strength is a big driver behind raising guidance for the year because North America really is performing strongly right now," Hugh Johnston, PepsiCo's chief financial officer told Reuters.

"Consumers are willing to pay for affordable treats that they find are new and interesting and, frankly, a differentiated product."   Continued...

Cases of Pepsi are displayed for sale in Carlsbad, California February 7, 2012. REUTERS/Mike Blake/File Photo