Over the last several years, PepsiCo Inc. (NYSE:PEP) has made a concentrated effort to change its formula to spur growth. The Purchase, N.Y.-based food and beverage company demonstrated that its strategy of cutting costs and making acquisitions is paying off, as third-quarter earnings came in better than expected Thursday.
PepsiCo reported net income increased 9% to $1.72 billion, or $1.09 a share, beating Thomson Reuters forecast of $1.03 per share. The company was able to lower production costs by 1.7% and administrative expenses by 8.1% as well as increase international sales attributed to acquisitions in Europe such as its purchases of a 75.5% stake in the Russian juice producer OAO Lebedyansky and Sandora LLC in the Ukraine. (Subscribers to The Deal Pipeline may read more here.)
Specifically, the company pointed to the growth of its PepsiCo International unit, where "net revenue grew 12% and operating profit grew 18%. Acquisitions contributed 10 percentage points to net revenue growth and 6 percentage points to operating profit growth."
As far as its two pending acquisitions of bottling distributors -- Pepsi Bottling Group Inc. (NYSE:PBG) and Pepsi Bottling Americas Inc. (NYSE:PAS) -- PepsiCo anticipates the additions will help push earnings per share up 11% to 13% in 2010. (Subscribers to The Deal Pipeline may read more about the pending deals here.)
As far as PepsiCo's future dealmaking, look for more of the same. Indra Nooyi, PepsiCo chairman and chief executive officer, said in a press release:
We will continue to make targeted investments across our entire portfolio, and we expect these to ramp up next year as we begin to realize the benefits of the integration of our two anchor bottlers. These investments in innovation, infrastructure, key markets and people development, coupled with our operating agility and focus, give me great confidence in both the near-and long-term growth prospects of PepsiCo.
- Gerald Magpily
Continue reading below
