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Pepsi is 'back in growth' mode

Brian Sozzi
·Executive Editor
Updated

PepsiCo is promising more pop in the sales at its important beverage business.

PepsiCo (PEP) reported second quarter total revenue of $16.45 billion on Tuesday, beating Wall Street forecasts for $16.43 billion. Organic revenue — a key performance measure for the company — rose 4.5%, topping analyst forecasts for 4.3% growth. Earnings tallied $1.54 a share versus estimates for $1.50 a share.

Performance by segment was a bit more mixed, however.

While organic revenue increased in all segments, organic volume in Frito Lay North America and Quaker Foods was unchanged. And organic volume dropped 2% in that aforementioned PepsiCo North American Beverage business. Operating income — excluding volatile currency swings — declined at Quaker Foods, PepsiCo North American Beverage and the Asia segment.

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PepsiCo cited lingering pressure in carbonated soft drinks, Gatorade and oatmeal as some of the drivers behind weakness at its beverage and Quaker units. Frito Lay’s results were paced by demand for Cheetos, Doritos and variety packs.

New beverages aimed at athletes

FILE - In this Oct. 6, 2010, file photo, bottles of Gatorade, a PepsiCo brand, are on display at a grocery store in Palo Alto, Calif. A shift by PepsiCo from sodas to more healthy and low-calorie drinks crimped sales in the third quarter of 2017, even with strong snack sales pushing profits up 8 percent compared with a year earlier. (AP Photo/Paul Sakuma, File)

But above all else, if PepsiCo is to deliver on its full-year guidance (which it reiterated Tuesday) it will have to turn the corner on beverages. One of PepsiCo’s top executives thinks the company can do just that via stepped up marketing and new products.

“I think we are fixing that business, and we are doing it one big step at a time,” PepsiCo Vice Chairman and Chief Financial Officer Hugh Johnston said on Yahoo Finance’s The First Trade.

Johnston said the core Pepsi business is “back in growth” mode. Meanwhile, the company has released a new Mountain Dew product playing into sports-minded folks looking for an energy boost. The Gatorade brand has debuted Bolt 24, a more natural take on an athletic drink that takes aim at the surging BodyArmor, which is minority owned by rival Coca-Cola (KO).

“I feel like we have made good progress —we are not fully satisfied - but we are happy with the progress that we have made and we feel like we have got a plan in place to get that business in a very good spot,” said Johnston.

The beverage and snack giant’s stock fell slightly in midday trading.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow him on Twitter @BrianSozzi

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