Third quarter earnings for PepsiCo were at a higher level than what was forecasted. These surprising increased earnings over forecast, despite weakened revenue, for the third quarter were due to the U.S. dollar being more robust and the demise of certain businesses.
PepsiCo is not only the manufacturer of Pepsi-Cola and diet Pepsi, but other products include Frito-Lay snacks and orange juice under the branding of Tropicana.
The third quarter net income was reported to be $1.90 billion. This figure is a reflection of the value per share at a $1.21. This reported revenue for the third quarter is down from a level of $2 billion or at a level of $1.25 of value per share. This comparison is current year versus last year to date.
Additionally, if certain factors were taken out of the equation, earnings per share of PepsiCo would be valued at $1.20. Those factors that are included in the overall third-quarter postings would be restructuring expenses and other expenses as well as an increase on commodity hedges.
Analysts had predicted revenues to be at a level of $1.16 per share. Income for PepsiCo was anticipated to be at a level of $16.9 billion. Consequently, actuals fell by 5% to a level of $16.65 billion.
Adding to the mix were fluctuations influenced by business in the countries of China and Mexico. Those fluctuations increased the actual revenue for Pepsi Co. due to the variance of currency value. This increased fluctuation allowed PepsiCo to realize a growth of 5%. Comprising the increased revenue at this level was 1% attributed to growth in volume and the remaining 4% increase attributed to points from increased prices. Also driving these revenues higher, through business conducted in these two countries, was the action of re-franchising its bottling business.
Coca-Cola, a significant competitor of PepsiCo, announced their quarterly earnings a day before PepsiCo released their figures. In those earnings Coca-Cola reported a decline in revenues and missed estimates. Those decreases in revenues were attributed to the financial negative impact being experienced by Europe and lackluster sales in the Pacific region.
PepsiCo experienced an increase in sales at a level of 6%. This was due to a robust sales market experienced in Latin America. Sales of Frito-Lay products increased at a level of 1% in North America and at a level of 2% increase for Quaker foods. The beverage market for PepsiCo realized a decrease in volume at a level of 3%.
PepsiCo also forecasted its earnings for the remainder of 2012. In that report they indicated a sales decline which would cause the value per share to decrease by 5% or to a level of $4.40 per share. This anticipated decline in sales is attributed to lower sales in the China and Mexico market.
PepsiCo is defining the year 2012 as a time of transition. Specifically, they are introducing new products such as Pepsi Next and looking at reductions on the expense side of the ledger. Those expense reductions include downsizing of staff.
Adding to the mix of the expenses are restructuring strategies that have cost the company $193 million. Rounding off the report are anticipated expenses of $205 million through the remainder of 2012 and $129 million in the years 2013 through 2015. These expenses are being attributed to the company becoming more productive.
