Starting outgoing CEO Indra Nooyi’s last full day with the company on a high note, food and beverage giant PepsiCo Inc. (PEP, Financial) recorded stronger-than-expected third-quarter earnings before the opening bell on Tuesday.
The Purchase, New York-based company posted adjusted earnings of $1.59 per share, topping Thomson Reuters’ estimates of $1.57. Revenue grew 1.5% from the prior-year quarter to $16.49 billion, beating expectations of $16.36 billion.
Despite the beat, shares were flat in premarket trading.
In a statement, Nooyi said she was pleased with the results.
“We continued to see very strong operating performance from our international divisions, propelled by developing and emerging markets; Frito-Lay North America generated solid net revenue and operating profit growth; and North America Beverages delivered another quarter of sequential improvement in top-line performance,” she said.
While PepsiCo saw revenue growth as a result of its marketing investments and increasing demand in emerging markets such as Latin America, sales in its North America beverage segment disappointed. The segment, which encompasses Gatorade, Mountain Dew and its trademark cola brand, saw sales increase 2% to $5.46 billion, just shy of the $5.6 billion analysts were expecting. In addition, the business’ operating profit declined 11% as a result of increased marketing expenses as well as higher transportation and commodity costs, which the company tried to offset by raising prices.
Sales in the Frito-Lay snack division rose 2.6% in North America, but fell short of expectations as a result of lower demand.
PepsiCo revised its guidance to 3% revenue growth for the year. Due to a stronger dollar, it anticipates earnings will be negatively affected by one percentage point, forecasting earnings of $5.65 per share.
With a market cap of $152.75 billion, PepsiCo shares were down 2.45% on Tuesday morning at $108. GuruFocus estimates the stock has lost 7% year to date.
As previously announced, Nooyi will step down as CEO of PepsiCo later this week after 12 years at the helm. She will be succeeded by Ramon Laguarta.
According to GuruFocus’ industry overview page, PepsiCo is the second-largest nonalcoholic beverage company, behind Coca-Cola (KO, Financial), with 34.5% of the industry.
Disclosure: No positions.
