PepsiCo Tops Estimates on Lower Profit

by Christopher Freeburn | July 25, 2012 10:46 am

[1]PepsiCo (NYSE:PEP[2]) said on Wednesday that it earned $1.48 billion during the second quarter[3], down 21% from $1.89 billion during the same period in 2011.

The soft drink and snack food giant also saw its revenues slide 1.8% to $16.5 billion, compared to $16.8 billion last year.

Adjusted EPS for the quarter was $1.12, which topped the $1.09 that Wall Street had expected, the Associated Press noted.

Earnings for the second quarter were reduced by $77 million in charges relating to the company’s cost-cutting effort, which has trimmed its payroll by 3% so far. Another $312 million in restructuring charges are anticipated for the remainder of this year.

The company attributed its revenue decline to the re-franchising of its Mexican and Chinese operations, which shifted revenue recognition to local distributors instead of Pepsi.

Increased commodity and marketing costs lowered operating profits by 15%, according to company officials. Sales volume in North America slipped 1%.

Pepsi also noted that a strengthening U.S. dollar has negatively affected earnings.

The company recently announced plans to invest $2.5 billion in China over the next several years to develop new products suited to Chinese tastes[4]. Pepsi is betting on expansion in China to offset market share losses in the U.S. to its traditional rival Coca-Cola (NYSE:KO[5]).

Shares of PepsiCo edged up about 1% in early Wednesday trading.

Source URL: https://investorplace.com/2012/07/pepsico-tops-estimates-on-lower-profit/

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