PepsiCo leans on snack strong snack sales

PURCHASE, N.Y. (AP) — PepsiCo’s second-quarter was weighed down by a higher tax rate and it’s still trying to figure out what Americans want to drink now, but the company’s adjusted profit beat Wall Street expectations and revenue improved.

Sales of Frito Lay in North America covered some of the weakness in beverage sales, and shares rose more than percent before the opening bell Tuesday.

For the period ended June 16, the beverage and snack maker earned $1.82 billion, or $1.28 per share. A year earlier the Purchase, New York, company earned $2.11 billion, or $1.46 per share.

Stripping out certain items, earnings were $1.61 per share. That, according to a poll by Zacks Investment Research, was 10 cents better than Wall Street had expected.

PepsiCo Inc.’s tax rate climbed to 36.9 percent, from 23.7 percent. The company said Tuesday that a $777 million provisional transition tax expense led to the tax rate increase.

Revenue rose to $16.09 billion from $15.71 billion, driven by higher sales in its Europe Sub-Saharan Africa unit and its Frito-Lay North America division. Still, the performance was just shy of most projections.

In the Frito-Lay North America unit, operating profit climbed 5 percent while revenue increased 4 percent.

The North America Beverages division reported a 16 percent drop in operating profit and 1 percent dip in revenue.

PepsiCo, like rival Coca-Cola, is looking to find the right balance of healthier drinks and its classic sodas to match with consumers’ changing tastes. Both companies have been promoting sparkling, flavored water brands after the surging popularity of La Croix. But they’re also trying to find ways to keep people interested in their namesake brands. PepsiCo in recent years has tried changing the artificial sweetener in Diet Pepsi, and Coca-Cola more recently started putting Diet Coke in taller, thinner cans and adding flavors to the drinks.

PepsiCo still stuck to its full-year earnings forecast of $5.70 per share.

This article provided by NewsEdge.