PepsiCo Inc. and Coca-Cola Enterprises reported higher-than-expected quarterly profits, helped by price increases on sodas, and stood by their full-year forecasts.
For PepsiCo, 2012 is a transition year as it ramps up marketing, cuts thousands of jobs and streamlines its portfolio to improve its performance, especially in its North American drink business.
“As the year progresses, quarter by quarter, you’ll start seeing the business strengthen,” PepsiCo chief executive Indra Nooyi said on a conference call on Thursday.
Though its results beat expectations, PepsiCo shares fell slightly in morning trading on the New York Stock Exchange, dropping 0.2 per cent to $66.50.
“Expectations were low and sentiment is still fairly negative,” said JP Morgan analyst John Faucher. “We don’t think that most skeptics will be convinced yet.”
PepsiCo, maker of Frito-Lay snacks, Quaker oatmeal and Tropicana orange juice, said results were in line with its own expectations in the quarter, during which commodity cost inflation was at the highest rate expected for the year.
The company said it made progress on a range of initiatives in the first quarter, including innovation and advertising.
It launched Pepsi Next, a mid-calorie cola that it said is performing better than expected. It also boosted spending on media advertising by 25 per cent. Overall, marketing spending as a percentage of sales is expected to rise by half a percentage point to 5.7 per cent this year.
Like most food and beverage companies, PepsiCo and Coca-Cola Enterprises raised prices to offset higher commodity costs. But those price increases can often hurt sales volume.
PepsiCo said net income was $1.13-billion, or 71 cents per share, in the first quarter, down slightly from $1.14-billion, or 71 cents a share, a year earlier.
Excluding items, earnings were 69 cents per share, in line with management’s expectations, but 2 cents more than analysts’ estimates, according to Thomson Reuters I/B/E/S.
Net revenue grew 4 per cent to $12.43-billion, driven by price increases. Currency exchange rates reduced revenue growth by 1 percentage point.
Volume rose 2 per cent in the company’s Americas Foods unit as strength in Latin America offset declines at the North American units of Frito-Lay and Quaker Foods. The Americas Beverages unit’s volume fell 1 per cent.
PepsiCo stood by its 2012 outlook for earnings to drop 5 per cent from $4.40 a share in 2011. It expects net revenue growth in the low single-digit percentage range this year.
Also on Thursday, Coca-Cola Enterprises reported first-quarter earnings of 36 cents per share, topping analysts’ average estimate of 33 cents, according to Thomson Reuters I/B/E/S.
The company, which bottles Coca-Cola Co. drinks in Europe, affirmed its full-year forecast for earnings per share to grow about 10 per cent.
Coke Enterprises shares were down 0.3 per cent at $29.05 in morning trading on the New York Stock Exchange.