📈 69% of S&P 500 stocks beating the index - a historic record! Pick the best ones with AI.See top stocks

PepsiCo's advertising blitz drives profit beat, solid forecast

Published 10/03/2019, 08:17 AM
PepsiCo's advertising blitz drives profit beat, solid forecast
WFC
-
PEP
-

(Reuters) - PepsiCo Inc (O:PEP) beat third-quarter profit estimates and forecast upbeat revenue growth for 2019 on Thursday, as aggressive advertising and a focus on healthier products spurred demand for its beverages and snacks in North America.

Shares rose 2.2% to $136.83 in premarket trading, as the company said it expects to meet or exceed its fiscal 2019 organic revenue growth target of 4%.

Since taking the helm last October, Chief Executive Officer Ramon Laguarta has carved out a multi-billion dollar strategy that includes partnering with celebrities such as Chrissy Teigen and ramping up manufacturing capacity for smaller cans to boost demand for out-of-favor sugary sodas.

The company has splurged on new ads for its trademark Pepsi colas, as well as Mountain Dew and Gatorade beverages, rounding off with a campaign centering around the National Football League's 100th anniversary.

Advertising and marketing expenditure has increased 12% so far this year, the company said.

Gatorade sales have benefited from new low sugar and organic options, and the company said a sugar-less version of the sports drink surpassed half a billion dollars in retail sales since its launch in May last year.

Overall beverage sales in North America rose 3.4% in the third quarter to $5.64 billion, also supported by new flavors of its bubly sparkling water brand.

PepsiCo Chief Financial Hugh Johnston told Reuters that he expects bubly to become its next billion-dollar brand, with sales rising "dramatically" after a Super Bowl ad earlier this year.

The company's major snack brands, Doritos and Cheetos, also got a boost from the marketing push, even as calorie-counting Americans increasingly shift toward healthier options.

On-the-go lifestyles are helping snack sales, Johnston said.

"With busier lifestyles (there) comes a desire to eat more conveniently, which is a strong tailwind for our business".

Net revenue rose 4.3% to $17.19 billion in the three months ended Sept. 7, beating analysts' estimates of $16.93 billion, according to IBES data from Refinitiv.

However, the higher investments have been a drag on profit.

The company left its full-year core earnings per share forecast unchanged, which Wells Fargo (NYSE:WFC) analyst Bonnie Herzog said was a sign that the cost of achieving top line growth was rising.

PepsiCo's attributable net income fell to $2.10 billion, or $1.49 per share in the quarter, from $2.50 billion, or $1.75 per share, a year earlier.

Excluding one-time items, the company earned $1.56 per share, beating the average estimate of $1.50.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.