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New York : Soft drink and snack maker Pepsi on Thursday reported a quarterly profit excluding items that met analysts' expectations and forecast full-year earnings in line with its long-term goals, sending its shares up about five per cent.
Shares of Pepsi, which makes Pepsi Cola drinks, Frito Lay snacks and Quaker oatmeal, have lost 16 per cent in the last month as investors feared that weak consumer trends and high costs for commodities such as grain and oil would crimp 2008 earnings.
Relief predicted
"Given the significant weakness in Pepsi shares over the past few weeks on worries about the '08 outlook, we should see some relief as management confirmed its outlook," wrote Morgan Stanley analyst William Pecoriello in a research note.
Pepsi said net income for its fourth quarter, ended December 29, was $1.26 billion, or 77 cents per share, down from $1.83 billion, or $1.09 per share, a year earlier. Excluding items, the company earned 80 cents per share, meeting the average estimate of analysts polled by Reuters Estimates. "The market was preparing itself for a miss, so the high-quality in-line number is more than enough," wrote J.P. Morgan analyst John Faucher in a research note.
Net revenue for the quarter rose 17 per cent to $12.35 billion, as total sales volume rose 5 per cent. Pepsi said it was able to raise prices and improve productivity, which helped offset soaring costs for commodities including grains, cooking oils and energy.
Quarterly volume rose 3 per cent at Frito Lay and 1 per cent at the North American beverage business. Higher sales of noncarbonated drinks, including Gatorade and Lipton tea, offset declines for carbonated soft drinks, like Pepsi Cola and Diet Pepsi, and juices like Tropicana, as price increases hurt sales. Quaker Foods saw its North American volume rise 3 per cent in the quarter on improved sales of oatmeal and cereals.
International business
For the company's international business, which has grown in importance as soft drink sales in the US have begun to decline, snack volume rose eight per cent and drink volume rose nine per cent.
The snacks business saw double-digit growth in Russia, the Middle East, Turkey and India; the beverage business saw double-digit increases in the Middle East, China, Brazil, Argentina, India and Russia. Beverage sales volume declined in Mexico, Thailand and Spain.
Pepsi said its tax rate, which rose to 30.6 per cent from 28.4 per cent in the year-ago period, reduced core earnings per share growth by more than 3 percentage points.
Meanwhile, currency fluctuations boosted profit by about 7 percentage points, according to Richard Goodman, Pepsi's chief financial officer.
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