PepsiCo Profit Dips in 3Q on Softer Beverage Sales

PepsiCo (NYSE:PEP) posted a decline in third-quarter profit on Wednesday, hurt by weaker prices in its beverages group and a stronger dollar that softened sales.

The Purchase, N.Y.-based global food and beverage company also reaffirmed its fiscal 2012 guidance and said it plans to return $6 billion to shareholders this year.

In its latest quarter, Pepsi reported net income of $1.9 billion, or $1.21 a share, down 5% compared with a year-earlier $2.0 billion, or $1.25 a share. Excluding one-time items, Pepsi earned $1.20 a share, topping average analyst estimates of $1.16 in a Thomson Reuters poll.

Revenue for the three months ended Sept. 8 fell 5% to $16.65 billion from $17.58 billion a year ago, missing the Street’s view of $16.9 billion. Pepsi attributed the decline to structural changes and negative foreign exchange rates.

Excluding those special quarterly impacts, PepsiCo said organic sales grew by 5%, a reflection of disciplined pricing, brand-building investments and stronger volumes.

However, revenue growth in its Frito-Lay, Americas and Latin America foods groups were offset by reported revenue declines in Pepsi’s beverages group, hurt by lower prices and a decline in volumes. Reported sales also fell in Europe and Asia, the Middle East and Africa.

"PepsiCo is diligently executing the strategy we set forth at the start of the year, and we remain on track to achieve our full-year targets," PepsiCo CEO Indra Nooyi said in a statement.  "We will continue to invest aggressively to build our brands, accelerate innovation to drive growth, focus on execution and deliver our productivity agenda while returning cash to shareholders."

Pepsi reaffirmed its fiscal 2012 constant currency net revenues and non-GAAP EPS guidance, which it expects to decline by about 5% from its fiscal 2011 EPS of $4.40. The consensus is calling for earnings of $4.06 a share.

The maker of Mountain Dew, Sierra Mist, Doritos and Tropicana said it plans to return more than $6 billion to shareholders split virtually evenly between dividends and buybacks.

Shares of PepsiCo edged higher Wednesday morning to $70.50.

The company’s multi-year restructuring plan is expected to help deliver more than $1 billion in productivity savings this year and another $3 billion in savings by 2015, Pepsi said. The overhaul plan cost PepsiCo $83 million in the third quarter.