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October 7, 2010
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New York-based PepsiCo’s core earnings advanced to $1.22 per share in the quarter from $1.09 registered in the year-ago period, in-line with the Zacks Consensus Estimate. The year-over-year growth reflects the acquisition of its two anchor bottlers, broad-based gains across its snack and beverage portfolio in key international markets, disciplined investments and prudent cost controls.
Based on the reported quarter’s results, PepsiCo reaffirms earnings per share growth of 11%–12% on the basis of core constant currency from its fiscal 2009 earnings of $3.71 per share.
The quarterly total sales jumped 40% to $15.5 billion in the quarter from $11.1 billion in the prior-year quarter, demonstrating strong growth across its businesses.
In the quarter, PepsiCo registered an operating profit of $2.8 billion, up 25% compared with $2.2 billion in the earlier-year period.
Segment Details
In the quarter, revenues from the company’s four segments -- PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB); Europe; and Asia, Middle East & Africa (AMEA) -- jumped 4%, 118%, 47% and 15%, respectively. Operating profits for PAF; PAB and Europe advanced 10%, 68%, 33% and 17%, respectively. However, the AMEA segment reported an operating loss of 18%.
PAF registered solid volume growth and improved cost structure, partly offset by investments in innovation and infrastructure.
PAB results reflect favorable impact of the bottling acquisitions, and improving sequential organic volume trends across the product portfolio and synergies.
Revenues and operating profit growth in Europe represents volume expansion of both the snacks and beverages business. Furthermore, the acquisitions of two bottling and productivity initiatives helped boost Europe’s performance.
AMEA’s performance benefited from increasing volume growth at the snacks and beverages business, robust productivity initiatives and tight cost controls, offsetting cost inflation.
Financial Update
PepsiCo exited the quarter with cash and cash equivalents of $5,577 million. The company repurchased 17 million shares for $1.1 billion in the quarter. In keeping with the company’s strategy of returning incremental value to shareholders, PepsiCo intends to repurchase shares worth $4.4 billion in fiscal 2010. During the quarter, the company paid a dividend of $767 million.
PepsiCo’s operating cash flow jumped 29% year over year to $5.3 billion and operating cash flow, net of capital expenditures, was $4.2 billion year-to-date.
For the year, PepsiCo targets an operating cash flow of around $7.9 billion and operating cash flow, net of capital expenditures, to be about $4.3 billion. Capital expenditure for the fiscal 2010 is forecasted to be $3.6 billion.
In spite of a sluggish market, PepsiCo aspires to deliver solid and persistent growth. The company continues to expand in the developed and emerging markets through its innovation in the snacks and beverages portfolio.
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