On Thursday, the beverage giant reported fourth-quarter earnings of $1.06 a share, in line with Wall Street forecasts. Total revenue fell 7% year over year to $18.6 billion, narrowly surpassing estimates for $18.5 billion. Excluding the impact of the stronger U.S. dollar, PepsiCo's revenue rose 4%. Gross profit margins surged 165 basis points, as PepsiCo benefited from lower costs for oil and several agricultural commodities, as well as roughly $1 billion in cost savings taken in 2015.
"Our portfolio has been strategically designed to weather the current macroeconomic challenges -- our results reflect the balance of our brand portfolio, geographic footprint, consistent marketplace execution and a relentless focus on productivity," said PepsiCo chairman and CEO Indra Nooyi in a statement.
The standout for the quarter was PepsiCo's Frito Lay North America division, where organic revenue and operating profits rose 3% and 6%, respectively. The snack segment's volume increased by 1%. Organic revenue excludes the impact of currency fluctuations, acquisitions and one-time items.
The North American beverage business saw organic volume rise 1%, cooling from 3% growth in the third quarter. Organic revenue for the segment gained 3%, with operating profits improving by a similar amount. PepsiCo pointed out that it was the segment's best profit performance in three years, helped by a combination of cheaper commodities, cost savings and pricing benefits from smaller can sizes.
PepsiCo's rival Coca-Cola (KO) managed to improve its volume performance in its U.S. beverage business in the fourth quarter. Coke's overall volume in its North American beverage segment increased 3%, driven by Coke Zero, Sprite, Fanta, juice, tea and packaged water. The company highlighted a decline in volume for Diet Coke. Still, Coke's beverage volume in North America only rose by 1% in the third quarter.
PepsiCo vice chairman and CFO Hugh Johnston said in an interview with TheStreet, "If we look narrowly at colas, the answer is yes" -- the company has lost a little market share. "But the strategy of the business is to manage the overall liquid refreshment beverage category, not just one sub-segment called colas," he said. "Obviously for our competitor, that is by far the biggest piece of their business, and they tend to spend a lot of time on that."
Organic revenue for PepsiCo's Quaker Foods North America division rose 1%, compared to 2% growth in the previous quarter. Organic volume fell 2% for the segment, while operating profits were unchanged.
Despite slowing growth globally, the company capped off a year in which organic revenue and earnings rose by 5% and 10%, respectively. In 2016, PepsiCo expects earnings of $4.66 a share, up about 1.9% year over year. Wall Street estimates PepsiCo will earn $4.76 a share this year.
The company anticipates cutting another $1 billion in costs as part of a plan to slash about $5 billion in total costs through 2019. Executives also decided to lift the dividend by 7.1%.
Johnston went onto hint at the potential for several new, important product releases in 2016.