PepsiCo Profit as Expected, but Slowdown Seen
PepsiCo Inc. said first-quarter earnings rose 19%, in line with expectations, but it cautioned that second-quarter profit might feel the pinch from slower growth in its Frito-Lay snack foods unit because of potato shortages.
The nation’s second-largest soft drink maker said operating profit rose to $377 million, or 24 cents a diluted share, a penny more than analysts’ forecasts, from $318 million, or 20 cents, a year earlier. The year-ago results don’t include the restaurants it spun off last year.
Revenue rose 3% to $4.35 billion, boosted by gains in global beverage volume and North American snack and beverage sales.
Chief Executive Roger Enrico is counting on strong profit from snacks to carry the company while he updates the look of its namesake soda, tests new drinks and finds new bottlers to better take on rival Coca-Cola Co.
Higher potato costs in the second quarter will probably cut Frito-Lay’s profit growth to about 10% in the quarter from estimates of 14% to 15%, a vice president of investor relations, Margaret Moore, told analysts.
Frito-Lay is the biggest maker of salty snacks such as Doritos and Lay’s chips, with 56% of the U.S. market.
Beverage sales rose 6% internationally, with a 2.5% gain in North America. The snack foods division’s revenue rose 7% worldwide.
The company’s new Wow chips, which contain the olestra fat substitute, did not have a large effect on profit or sales, the company said.
In October, Pepsi spun off its Pizza Hut, KFC and Taco Bell restaurants into a company called Tricon Global Restaurants. That has allowed Pepsi to spend more on its snacks and beverages.
PepsiCo’s earnings report sent its shares down $3.31 to close at $39.75 on the New York Stock Exchange.
At a Glance
Other earnings, shown excluding one-time gains and charges unless noted, include:
REAL ESTATE
* Manufactured Home Communities Inc., headed by billionaire financier Sam Zell, said first-quarter funds from operations rose 32% to $15.4 million, or 50 cents a diluted share, 3 cents higher than expected, from a year ago. The real estate investment trust’s revenue climbed 58% to $44.9 million.
* Promus Hotel Corp.’s first-quarter profit from operations rose 30% to $36 million, or 41 cents a diluted share, from a year ago, a penny more than estimates, as demand for rooms allowed it to raise rates at its Doubletree, Embassy Suites and Hampton Inn hotels. Revenue rose 7% to $254.5 million.
* United Dominion Realty Trust Inc., one of the nation’s largest owners of apartment properties, said first-quarter funds from operations rose 14% to $32.9 million, or 36 cents a diluted share, in line with estimates. The REIT’s revenue rose 17% to $105.4 million.
****
OTHER INDUSTRIES
* AmeriSource Health Corp. said fiscal second-quarter profit rose 23% to $16.2 million, or 67 cents a diluted share, from a year ago, a penny more than expectations, on a 23% rise in revenue to $2.19 billion. The planned acquisition of AmeriSource by competitor McKesson Corp. is on hold while the companies fight with the Federal Trade Commission, which is opposing the purchase and a similar transaction by two other distributors.
* Bethlehem Steel Co. said first-quarter earnings rose 79% to $68.6 million, or 49 cents a diluted share, from a year ago, far exceeding estimates of 36 cents, as the steelmaker cut costs. Sales fell 5% to $1.13 billion.
* Chubb Corp.’s first-quarter earnings rose 7% to $188.8 million, or $1.10 a diluted share, 2 cents higher than estimates, as the insurer lowered its costs of underwriting its property and casualty policies and paying claims. Chubb said its combined ratio, a measure of an insurer’s profitability showing claims and underwriting costs as a percentage of premiums, declined to 96.1% from 96.3% a year ago.
* DSC Communications Corp. reported a first-quarter loss of $30.1 million, or 25 cents a diluted share, contrasted with income of $16.4 million, or 14 cents, a year earlier, as revenue fell a greater-than-expected 9% to $314.8 million and operating expenses rose. The results were within the phone equipment maker’s prediction on April 1 of a loss of 15 cents to 25 cents. Before that forecast, analysts had expected 16 cents a share.
* Delta Financial Corp. said its first-quarter income rose 18% to $8.25 million, or 54 cents a share, from a year ago, a penny higher than estimates, as the mortgage lender boosted direct lending to clients.
* Estee Lauder Cos.’ fiscal third-quarter earnings rose 19% to $45.7 million, or 33 cents a diluted share, from a year ago, matching analyst estimates, on strong sales of fragrances such as Lauder Pleasures for Men and Clinique Happy. The company, which also makes Bobbi Brown brand cosmetics, said sales rose 10% to $871.5 million.
* LCI International Inc.’s first-quarter profit rose 32% to $29 million, or 29 cents a diluted share, beating forecasts by 2 cents, as the long-distance company’s revenue jumped 22% to $448 million. The results are the first since LCI agreed to be bought by Qwest Communications International Inc. for $4.93 billion to create the fourth-largest U.S. long-distance company.
* Metro-Goldwyn-Mayer Inc. reported a loss for the first quarter of $18.6 million, or 28 cents a share, based on 65.8 million weighted average shares outstanding. In its third financial report following its initial public offering in November, the company said first-quarter earnings before interest, taxes, depreciation and amortization were $7.1 million. Prior-year results are not comparable because of the acquisition of Orion Pictures Corp. and certain of its subsidiaries in July, MGM said. Revenue was $316.5 million in the latest quarter.
* Minnesota Mining & Manufacturing Co. said its first-quarter net income fell 2% to $400 million, or 98 cents a diluted share, from a year ago, a penny lower than estimates. The maker of Post-It notes, Scotch tape and medical supplies said revenue edged down 0.4% to $3.70 billion. 3M said currency translations hurt results but not as much as it expected. 3M also said it expects currency translations to reduce earnings by 10 cents a share in the current quarter, slightly more than previously thought, but it expects full-year earnings to reach the range of $4.15 to $4.30 a share estimated by analysts.
* Warner-Lambert Co.’s first-quarter profit rose 37% to $279 million, or 99 cents a diluted share, from a year earlier. Revenue jumped 25% to $2.22 billion, despite slower sales of its blockbuster drugs, Lipitor and Rezulin. The drug maker, which also makes consumer products such as Schick razors and Trident chewing gum, said last week that it expected to earn 99 cents a share.
