PepsiCo Q2 Results Beat Expectations, Investors Ignore Lower Outlook

PepsiCo Inc. PEP announced a 1 percent increase in profit for the second quarter driven by 1.15 percentage points expansion in gross margin as revenue witnessed a downtick of 3.3 percent. However, core earnings and revenue came in more than analysts estimated.

PepsiCo reported net income of $2.01 billion, up 1 percent from $1.98 billion while earnings advanced four percent to $1.38 a share from $1.33 a share in the year-ago quarter. Its core earnings also grew 2 percent to $1.35 a share. The company indicated that on a constant currency basis, its core earnings would have advanced 6 percent. Street analysts expected the company to report earnings of $1.30 a share.

Moving ahead, PepsiCo expects core earnings to be $4.71 a share for the full year, which is $0.02 a share lower than the Street analysts' expectations of $4.73 a share. The company expects about 4 percent organic revenue growth and that foreign exchange transaction to impact its revenue by four percentage points.

Shares traded up about 1.7 percent at $107.79 in the pre-market session.

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The company's net revenues fell 3 percent to $15.39 billion from $15.92 billion in the previous year quarter. This was better than Street predictions of $15.37 billion. The company said foreign exchange translation had an unfavorable impact of 4 percentage points. Similarly, the Venezuela deconsolidation impacted unfavorably by 2.5-percentage points on reported net revenue. Organic revenue, excluding the impacts of foreign exchange translation and structural changes, witnessed 3.3 percent growth.

PepsiCo's Chairman and CEO, Indra Nooyi, commented, "In what continues to be an incredibly volatile global macro environment, we are pleased with our results for the second quarter. While reported net revenue performance was negatively impacted by foreign exchange translation and the deconsolidation of our Venezuelan operations, we delivered balanced volume growth and positive price/mix driven by relentless execution of our commercial agenda and leading to solid organic revenue growth."

In the second quarter, cash flow provided by operating activities was $2.8 billion.