PepsiCo Share Prices Rise Following Strong Q2 Earnings That Beat Estimates
PepsiCo released its second-quarter earnings this week with figures that managed to beat initial analysts' forecast. The better-than-expected earnings boosted the company's shares, which saw a jump of close to 1 percent in premarket trading.
The company attributed the rise in its profit margins to the success of its healthier snack options and its foray into the sparkling water business.
PepsiCo's shares have managed to rise by around 20 percent so far this year. The New York-based food and beverage company's market growth far surpasses its rival Coca-Cola, which only managed to rise by around 10 percent so far this year. It has to be noted that Coca-Cola has a much higher market value of around $221 billion compared to Pepsi's market value of $185.8 billion.
The American beverage company reported earnings of $1.54 per share, beating the $1.50 per share that was expected. Its revenue for the quarter, standing at $16.449 billion, also beat analysts' estimates of $16.426 billion. PepsiCo reported a fiscal second-quarter net income of $2.04 billion, a significant increase from its $1.82 billion income during the same quarter last year. Net sales also increased by around 2.2 percent to $16.44 billion.
The rise in the company's earnings was bolstered mainly by its new water business and its partnership with Starbucks to supply its ready to drink coffee and other beverages. PepsiCo took advantage of the fact that most consumers are now drinking sodas and are turning to other alternative drinks. The company also released new types of drinks popular with younger consumers such as its new Mountain Dew Game Fuel.
The company's take on the recent sparkling water trend has also paid off substantially. The company recently released its new Bubly sparkling water brand, which the company's CEO Ramon Laguarta thinks will be its next "billion-dollar brand." PepsiCo is betting big on its sparkling water business, with plans to offer more options including different-sized cans.
Another strategy that has paid off is PepsiCo's move to sell its food items and beverage in smaller packaging. The strategy allows the company to have a much higher profit margin as it charges more per ounce, while also appealing to customers who prefer to buy smaller portions of the company's products.
Among its subsidiaries, Frito-Lay America was the strongest performer with a 5 percent growth in revenue. Meanwhile, the company's healthier line-up has seen an uptick in sales. This included its new Bare baked fruit and vegetable snacks brand. The company's North American Quaker Foods unit also reported a strong quarter.