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PEPSICO

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PepsiCo Boosts Spending And Sales -- WSJ

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07/10/2019 | 02:48am EDT

More marketing for established brands and new beverages lead to gain in quarter

By Jennifer Maloney and Kimberly Chin 

PepsiCo Inc. posted higher quarterly profit and sales as the food-and-beverage giant rolled out new products such as Pepsi Mango and ramped up marketing for some of its more established brands.

Under Chief Executive Ramon Laguarta, who took over from longtime chief Indra Nooyi in October, the company has been increasing spending on advertising and distribution networks, broadening its product lines and changing its packaging.

"We're trying to understand much better the consumer," Mr. Laguarta said Tuesday on a conference call with analysts.

Revenue in the company's North America beverages division increased 2.5% in the second quarter, as volume rose in ready-to-drink coffee and water brands such as Lifewtr and Bubly. The Pepsi and Mountain Dew brands, which slumped last year, continued to turn around, executives said. In April, the company introduced three new Pepsi flavors made with real juice and available at Target and Walmart stores in the U.S.

Gatorade continues to struggle, analysts say. Gatorade Zero, which was introduced last year, has been expanding the consumer base for the brand, Mr. Laguarta said. PepsiCo is also launching a new sports drink called Bolt24 with more natural ingredients such as electrolytes from watermelon -- an answer to BodyArmor and its acquisition last year by rival Coca-Cola Co.

Increased marketing spending also helped boost the company's Quaker oats business, including a return to volume growth for Aunt Jemima syrup and ready-to-eat cereals, the company said. Sales of those packaged foods had sagged in recent years as consumers spent less time in the center aisles of the supermarket browsing packaged foods.

Coca-Cola also has been experimenting with new variants of its flagship brand. The launch in February of Orange Vanilla Coke, its first new flavor in a decade, helped drive 6% growth in U.S. retail sales for the Coca-Cola brand in the first quarter. The soda giant is also expanding distribution overseas of coffee-flavored and energy-drink versions of Coke. It is slated to release second-quarter earnings later this month.

PepsiCo is opening a digital talent hub in Silicon Valley, aiming to create more personalized interactions with consumers through e-commerce. Meanwhile, its New York-based e-commerce team is experimenting with bringing to market quickly such products as grain-and-date bites and Izze Fruit Snack gummies.

Overall, the soda-and-snacks giant's revenue rose 2.2% from the year-earlier quarter to $16.45 billion. Organic revenue growth, which excludes currency fluctuations, acquisitions and divestitures, rose 4.5%.

As public concern mounts over plastic waste, the company last month said it would reduce the use of virgin plastic in the packaging of its water brands by offering Lifewtr in 100% recycled plastic and testing an aluminum-can option for Aquafina. It is also rolling out a high-tech water fountain that adds bubbles and flavors.

PepsiCo reported earnings of $2.04 billion for the quarter ended June 15, up from a year-earlier $1.82 billion and in line with analysts' estimates. Excluding one-time items, earnings were $1.54 a share, beating analysts' expectations for adjusted earnings of $1.50 a share.

Sales in the company's North America Frito-Lay division rose 4.5% in the second quarter. Sales in its Latin America division rose, but fell in its Europe and Sub-Saharan Africa division as well as its Asia, the Middle East and North Africa division.

The company, which affirmed its guidance for the full year, said it would make substantial investments in areas that would boost its manufacturing capacity, advertising and marketing.

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Kimberly Chin at kimberly.chin@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CORN FUTURES (C) - CBR (FLOOR)/C1 2.84% 371 End-of-day quote.-3.80%
GLORY SUN LAND GROUP LTD 5.00% 0.84 End-of-day quote.78.72%
LME ALUMINIUM CASH 0.75% 1755.5 End-of-day quote.-5.52%
LONDON SUGAR 0.64% 314.6 End-of-day quote.-5.81%
OATS FUTURES (O) - CBR (FLOOR)/C1 2.00% 280.25 End-of-day quote.-0.18%
ORANGE 1.00% 13.595 Real-time Quote.-4.91%
PEPSICO 0.78% 132.79 Delayed Quote.19.26%
WALMART INC. 0.81% 113.89 Delayed Quote.21.30%
WHEAT FUTURES (W) - CBR (FLOOR)/C1 0.37% 470.75 End-of-day quote.-6.46%
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Financials (USD)
Sales 2019 66 555 M
EBIT 2019 10 621 M
Net income 2019 7 518 M
Debt 2019 25 797 M
Yield 2019 2,87%
P/E ratio 2019 24,8x
P/E ratio 2020 22,5x
EV / Sales2019 3,16x
EV / Sales2020 3,06x
Capitalization 184 B
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Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 134,38  $
Last Close Price 131,76  $
Spread / Highest target 16,9%
Spread / Average Target 1,98%
Spread / Lowest Target -16,5%
EPS Revisions
Managers
NameTitle
Ramon Luis Laguarta Chairman, President & Chief Executive Officer
Hugh F. Johnston Vice Chairman, Chief Financial Officer & EVP
Mehmood A. Khan Vice Chairman, Chief Scientific Officer & EVP
Jody R. Davids Chief Information Officer & Senior VP
Daniel Lucius Vasella Independent Director
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