PepsiCo Inc. (PEP, Financial) released its first-quarter earnings before the opening bell on April 17. Record organic sales growth pushed earnings past analysts' projections.
Snapshot of the quarter
The beverage and snack foods company recorded earnings of $1 per share, up from 94 cents in the prior-year quarter. Revenue grew 2.6% to $12.88 billion. Organic revenue, which excludes the impact of acquisitions, divestitures and foreign exchange, climbed 5.2%.
In a statement, CEO Ramon Laguarta commented on the company’s performance:
"While adverse foreign exchange translation negatively impacted our reported net revenue performance, our underlying organic revenue growth accelerated to more than 5% in the quarter," he said. "Frito-Lay North America and each of our international divisions delivered particularly strong operating performance, and PepsiCo Beverages North America generated sequential quarterly net revenue acceleration."
Segment performance
PepsiCo's Frito-Lay North America division recorded 5.5% sales growth in the first quarter, while organic revenue advanced 6%. In contrast, the operating profit plummeted 10% year over year.
The beverage giant reported record double-digit organic sales growth in each of its international divisions.
Sales at Quaker Foods North America declined 1% in the reported quarter. Organic sales also fell 1%.
Guidance
The company expects 2019 earnings to come in at $5.50 per share. It is projecting organic sales growth of 4% for the same period. Free cash flow guidance is for $5 billion, while operating cash flows are estimated to be approximately $9 billion. The company plans to spend $4.5 billion in capital expenditures for the whole year.
Future plans
In order to freshen up its product mix, PepsiCo has been heavily investing in its snacks business.
In addition to its acquisition of snack foods manufacturer Bare Foods, the company bought SodaStream for $3.2 billion in December. Laguarta said SodaStream is doing well and has started gaining popularity in top markets like Europe, Canada and the U.S. Moreover, the company's investments in Pepsi and Gatorade have started to bear fruit, so it will now shift its focus to Mountain Dew products.
As a result of this progress, PepsiCo remains optimistic about improving performance over the next several quarters.
Disclosure: I do not hold any positions in the stocks mentioned.
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