PepsiCo (PEP) 'Operating from a Position of Strength,' CFO Johnston Tells CNBC

PepsiCo (PEP) CFO and Vice Chairman Hugh Johnston joined CNBC's "Sqwuak on the Street" to discuss the company's 2016 second quarter figures.
By Giovanni Bruno ,

NEW YORK (TheStreet) -- Shares of PepsiCo (PEP) - Get Report  are trading higher by 2.1% at $108.16 on Thursday morning, after the food and beverage giant reported increased 2016 second quarter earnings. CFO Hugh Johnston joined CNBC's "Squawk on the Street" to discuss the company's success.

"We are seeing very solid revenue growth and very solid bottom line driven by two things: innovation which is the product of the investments that we've made, and we've doubled R&D over the last 5 years into commercializing new products," Johnston explained.

"Our innovation right now couldn't be stronger and combine that with the ongoing terrific cost control, you're getting consistent results," Johnston continued.

However, the company does face challenges most notably in the beverage sector, but its plan to turn it around remains consistent with the company's commitment to innovation.

"Frankly with the late start to the summer this year I think you're going to see better beverage results in the balance of the year. More importantly, we have a whole string of innovation that I think will continue to drive the top line, because consumers are willing to pay for differentiated products," Johnston added.

Moreover, "the conversation is less about diet sodas specifically and more about the broader beverage category. If you look at the broad selection of beverages we have such a great variety which enables us to be the leader in North America," Johnston said.

"Right now we feel we've got the portfolio right and we feel were operating from a position of strength and don't feel he need to do anything," Johnston said before commenting on challenges internationally.

"Obviously the world's a volatile place right now, but with the nicely balanced geographic portfolio, we can overcome these challenges. In terms of the U.K. and Western Europe, it's a developed market so I think consumers will continue to pay for the innovation that we offer as we bring them differentiated products and exciting new brand campaigns."

PepsiCo's second quarter earnings per share price climbed by 4% to $1.38 in 2016, from $1.33 in 2015, however second quarter net revenue fell to $15.4 billion in 2016 from $15.9 billion in 2015. 

(PepsiCo is a part of Jim Cramer's charitable trust portfolio Action Alerts PLUS. See all of Cramer's holdings with a free trial).

Separately, TheStreet Ratings rate PepsiCo as  "Buy" with a ratings score of "B". This is driven by a few notable strengths, which TheStreet Ratings believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks TheStreet Ratings covers. 

The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and solid stock price performance. TheStreet Ratings feels its strengths outweigh the fact that the company shows weak operating cash flow.

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. 

You can view the full analysis from the report here: PEP

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