PepsiCo posted better than had been expected results for its 2017 first quarter that ended March 25, with both revenue and earnings beating estimates on Wall Street.
Increased prices, initiatives for cost cutting and healthier snacks all helped the company post results that exceeded expectations.
This helped partially offset challenging food and beverage trading conditions across the industry in North America along with the continued volatility in many emerging and developing markets.
PepsiCo’s core earnings per share during the first quarter were 94 cents, which beat estimates on Wall Street of 91 cents by over 3%.
Earnings were up 5.6% compared to the same period one year ago despite currency headwinds continuing to hit sales. In addition, currency took a 2% toll on earnings. On a constant currency basis, adjusted earnings increased 7% on strong growth in sales.
Total sales were up 1.6% compared to the same quarter in 2016 to end at $12.04 billion. Wall Street was expecting sales to reach $11.96 billion.
Revenues were helped by more demand in for PepsiCo food, snacks in beverages in Asia and Latin America as well as in Europe and Sub-Saharan Africa.
However, its growth in organic sales was less than the 3.7% increase recorded during the previous three-month period.
Total volumes were flat during the quarter versus a growth of 2% for the previous quarter. Organic snacks and foods expanded by 1%, while beverage volumes remained flat.
Organic food/snacks volume was down 1.5% for its Frito-Lay unit compared to a 1% growth during the previous quarter. At the same time, organic volumes fell 1% in its Quaker Oats unit compared to a 1% growth during the previous quarter.
Organic snacks volume increased 1% for Latin America, but was far below the previous quarter growth of 4%. Organic snacks volume was up 3% in Europe and Sub-Saharan Africa and 7% in Asia, Middle East and North Africa.
Organic beverage volumes were up 3% equal to the quarter before, but declined by 3% both in North and Latin America and 1% in Europe and Sub-Saharan Africa.
Gross margins shrank by 45 basis points, while core operating margin shrank by 28 basis points on lower gains of gross margins.
Core earnings guidance was reaffirmed by PepsiCo at $5.09 a share. In 2016, it was $4.85 a share and the guidance for 2017 reflects a growth of 4.9% for the year.
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