PepsiCo Earnings: Soda Sales Fizzle, Snack Sales Sizzle

PepsiCo (PEP) reported third quarter profit Tuesday that beat expectations. The food and beverage giant reported adjusted earnings per share of $1.35, outpacing forecasts of $1.26. Reported sales fell 5% year over year to $16.3 billion, weighed down by about 12 percentage points of adverse currency translation. Wall Street was expecting sales of $16.1 billion. Core sales, which exclude currency impacts, rose 7.4% year over year. Arguably the standout of the quarter for PepsiCo was its Quaker Oats division, which for quite some time was struggling as consumers migrated to quickly made hot cereals instead of longer to prepare steal cut oats. ‘We feel great about what’s happening in the Quaker Oats business in both hot cereal and ready to eat cereal – we’ve been gaining market share, we’ve been innovating with new products,’ explained PepsiCo vice chairman and CFO Hugh Johnston in an interview with TheStreet. PepsiCo’s beverage and Frito Lay business continued to perform well on the top and bottom lines. Organic revenue for Frito-Lay increased 2%, with profits improving by 7%. At the beverage business, organic revenue and profits rose 5% and 10%, respectively. 'Carbonated soft drink sales are still under pressure, they were down about 2% in the quarter,’ conceded Johnston, who was quick to add that sales of non-carbonated soft drinks, which include Tropicana, Gatorade and Gold Leaf tea, were up 10% on the quarter.