Pepsi Grows Profits, Shrugs Off Soda Decline, and Bests PB&J

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PepsiCo (NYSE:PEP) profit rose in the first quarter of 2014, but it was not from the effervescence of high soda sales. The company has a diverse portfolio of 22 brands — from its namesake soda, Gatorade, Mountain Dew, and Tropicana juices to snacks like Fritos, Lays, Cheetos, and even Quaker Oats — and that product diversity has helped the company immensely in recent quarters.

As demand for sugary, carbonated drinks has declined,  growth in the company’s beverage segments slowed in many regions, and the domestic profit of rival Coca-Cola (NYSE:KO) has flattened. In the first quarter, PepsiCo’s global beverage volume, including the important North American unit, was relatively unchanged from a year ago. But that hiccup has been offset by a sales expansion in its food divisions, which, along with cost-cutting measures, allowed the company to report better-than-expected first-quarter profit on Thursday.

Strong sales in the company’s snack food divisions and double-digit growth in emerging markets lifted quarterly profit. Earnings showed that in the quarter ended March 23, the soda and snack manufacturer posted net income of $1.22 billion, or 79 cents per share — 4 cents better than analyst expectations and an increase from the $1.08 billion, or 69 cents per share, reported a year ago. Excluding certain items, earnings came in at 83 cents per share. Alongside that bottom-line earnings beat, PepsiCo reported $12.6 billion in first quarter revenue. While sales were relatively unchanged from the year-ago quarter, they did exceed Wall Street’s expectations for first-quarter revenue of $12.4 billion.

“We’re pleased with our performance in the first quarter of 2014. PepsiCo delivered mid-single-digit organic revenue growth and double-digit core constant currency earnings per share growth, despite ongoing macroeconomic volatility, political instability and other challenging marketplace conditions in a number of our key markets,” said Chairman and Chief Executive Officer Indra Nooyi in the earnings press release.

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