PepsiCo beats earnings estimates on steady demand for sodas and snacks, names new CFO

By Juveria Tabassum and Jessica DiNapoli (Reuters) -PepsiCo topped Wall Street expectations for third-quarter revenue and profit on Thursday, helped by steady demand for its snacks and sodas in key international markets and strength in its healthier drinks category in the United States. The company also named Steve Schmitt, who is currently U.S. finance head at its biggest customer Walmart , as its new CFO, effective November. He succeeds Jamie Caulfield, who was in the CFO role for about two years and will retire after more than three decades with PepsiCo. The company is under pressure from activist investor Elliott Management for lagging behind main rival Coca-Cola, while also facing consumer pushback on price hikes over the years and scrutiny on synthetic flavors from the Trump administration. CEO Ramon Laguarta, however, said the company's interactions with Elliott have been collaborative, and that he agrees with the activist investor about its undervaluation. He said many of the investor's ideas were included in PepsiCo's current strategy. Pepsico shares rose 2% as the company maintained its annual organic revenue growth and adjusted profit in constant currency targets. The company's 12-month forward earnings multiple, a common benchmark for valuing stocks, was 16.54, trailing Coca-Cola's 20.90. Laguarta, however, did not give a clear answer to the activist investor's boldest idea to grow PepsiCo's margins by spinning off the company's large North American bottling network. PepsiCo's net revenue of $23.94 billion beat analysts' average expectations of $23.83 billion, according to data compiled by LSEG, while its adjusted earnings per share also topped estimates by 3 cents. "The company provided more detail than in the past on how they'll drive organic growth," said Dave Wagner, portfolio manager at PepsiCo shareholder Aptus Capital Advisors. "The pipeline is robust. There is a lot of work to do but it was pretty positive in my mind." BETS BIG ON NEW LAUNCHES PepsiCo is betting on more consumers preferring healthier options in the long run, a trend that is accelerating as appetite-suppressing drugs become popular and with the Trump administration backing the Make America Healthy Again movement. The company is planning to re-launch energy drink Gatorade following a similar rebranding of Lay's and Tostitos, and introduce a new product with electrolytes, fiber and protein from water brand Propel, Laguarta said. PepsiCo, which in recent months bought prebiotic soda brand Poppi and raised its stake in energy drink maker Celsius, also said it was evaluating acquisitions in fast-growing segments in the packaged food industry. "We'll see how consumers react," Laguarta said, adding that the prices on the new products would be higher, helping margins as PepsiCo continues to cut costs in its supply chain. COST CUTS A FOCUS PepsiCo would "aggressively reduce costs" in the snacks category in the U.S., with a plan that includes closing two plants and cutting nearly 15% of its product lines during the fourth quarter, the CEO said. The company is also offering smaller pack sizes as consumers look for affordable options, a move that helped drive volume growth in some Asian markets this year. The company's international business accounts for about 40% of its revenue. A crackdown on immigration under the Trump administration is denting demand among its Hispanic customers, executives said. While tariffs were a roughly three-percentage point headwind to its core earnings in the third quarter, the company plans to return to margin growth in the North America beverages category later this year. (Reporting by Prerna Bedi and Juveria Tabassum in Bengaluru; Editing by Anil D'Silva)

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