PepsiCo profit beats estimates; $12bn buyback planned

PepsiCo yesterday reported a higher-than-expected quarterly profit, helped by increased sales at its Frito-Lay snack business, and said it would buy back up to $12bn in stock by 2018. The company also raised its annual dividend by 7.3% to $2.81 per share and said it expected to return $8.5bn to $9bn to shareholders through payouts and buybacks this year. Activist investor Nelson Peltz’s Trian Fund Management has been pushing Pepsi for about two years to separate its snack division from its beverage business to make two leaner and more entrepreneurial companies. In January, Pepsi said it had elected William Johnson, a Trian advisor and former HJ Heinz Co chief executive officer, to its board. In a note, Stifel Nicolaus analyst Mark Swartzberg said he had an “improved long-term outlook (on Pepsi) from Trian’s influence on the board.” Sales in Pepsi’s North American snack business rose 3% in the fourth quarter. The business has been a bright spot for the company, helping its stock vastly outperform that of larger rival Coca-Cola Co in the past year. Sales in Pepsi’s beverage business, which has been hurt by a long-term decline in soft drink sales in the US, rose 1%, helped by an increase in overall prices and sales of non-carbonated drinks in North America. “We have momentum,” Chief Financial Officer Hugh Johnston told Reuters, noting the company’s growth with retailers in the US. “We are absolutely rolling right now.” Johnston, however, said macroeconomic conditions remained tough and that the stronger dollar was a challenge. Fourth-quarter net revenue fell about 1% to $19.95bn as the stronger dollar reduced the value of overseas sales, but the results exceeded the analysts’ average estimate of $19.66bn, according to Thomson Reuters I/B/E/S. Net income attributable to the company fell to $1.31bn, or 87 cents per share, from $1.74bn, or $1.12 per share.