PepsiCo Beats; Reaffirms Guidance

PepsiCo (PEP) earned $1.02 per share last quarter, excluding one-time items, a penny ahead of expectations. A year prior, the company earned $1.05.

Management reaffirmed its guidance for 2009. Both net revenue and EPS are expected in the mid to high single-digit growth range. The company expects foreign exchange to have approximately 6% negative impact on the EPS.

As far as the second quarter results, net revenues declined 3% during the quarter, attributable to declines in Quaker Foods North America - QFNA (-2.5%), Latin America Foods - LAF (-9.5%), PepsiCo Americas Beverages - PAB (-9.1%), United Kingdom and European Union - UKEU (-10.6%) and PepsiCo International (-3.9%). These declines more than offset growth in Middle East/Asia/Africa - MEAA (+5.3%), and Frito-Lay North America - FLNA (+6.4%).

The FLNA segment benefited from robust product innovation including line extensions of its core brands focusing on the segment’s health and wellness offerings. QFNA revenues declined primarily due to a shift towards lower priced products. In the PAB segment, revenues declined primarily due to challenging dynamics in the liquid refreshment beverage (LRB) market, shifts towards lower-priced products, stiff competitive environment and certain strategic choices on management’s part. LAF revenue growth declined due the negative impact of foreign currency. The UKEU revenue declined reflecting adverse foreign currency. MEAA segment revenue growth was driven by volume growth and favorable net pricing and mix.

PepsiCo is investing aggressively in R&D (research and development) in order to drive innovation to differentiate brands. Additionally, as part of its strategy to grow in key markets, the company intends to invest $1 billion over the next four years in China and another $1 billion in Russia over the next three years.

PepsiCo’s primary competitor, Coca-Cola (KO) topped expectations yesterday with profits of 92 cents per shares.

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