Juice and Snacks Give PepsiCo the Energy to Beat Estimates

PepsiCo Inc., the world’s second-largest soft drink company, said its third-quarter profit rose 7%, just beating Wall Street estimates, driven by strong results from its Frito-Lay snacks unit and Tropicana juice business.

PepsiCo, which warned Wall Street last month that lower beverage volumes would hurt quarterly demand, posted a pro forma profit of $507 million, or 34 cents a share, a penny higher than analysts expected and up from $475 million, or 32 cents, a year ago. Sales rose 7% to $4.6 billion.

Analysts said the figures were boosted by robust Frito-Lay results and better-than-expected North American concentrate volume since the company’s warning in September.

“Shipments of concentrate improved toward the end of the quarter, which will be viewed positively,” said John Faucher, analyst at J.P. Morgan.

Sales at PepsiCo and larger rival Coca-Cola Co. have been hurt by higher beverage prices in the U.S.

Earnings at Frito-Lay, PepsiCo’s biggest unit, grew 11% as sales rose 5%, helped mainly by more-profitable snacks such as Doritos, Fritos and Chee-tos.

Profit at the Tropicana unit, which was acquired in August 1998, climbed 54%, beating expectations, as sales jumped 12%.

North American beverage profit declined 17% on a 2.1% dip in sales. Concentrate shipments fell 2.5%.

Investors pushed Pepsi shares up $1.75 to close at $33.19 on the New York Stock Exchange.

The Purchase, N.Y.-based company said industry price hikes in the quarter have caused it to take a “conservative stance” on volume estimates for the rest of 1999.

At a Glance

Other earnings, excluding one-time charges and gains unless noted:

* Alcoa Inc., the world’s largest aluminum producer, said its third-quarter profit jumped 19% to $259.1 million, or 69 cents a share, as lower costs and higher prices more than offset a decline in sales. Cost-cutting also lifted results at Alcoa, a Dow Jones component. Although the profit matched estimates, some investors were disappointed because it didn’t exceed forecasts, as it had in five of the six previous quarters. The dip in sales--by 1.4% to $4.05 billion--also puzzled investors because aluminum demand has increased in the last year, some analysts said. Alcoa’s shares fell $2.13 to close at $62 on the NYSE. Earlier, the stock slid as much as $4.38. Shares had risen $3.88 in the previous two days on anticipation that earnings might exceed the average estimate of analysts polled by First Call.