Investors in PepsiCo saw glimmers of the end of the tunnel on Thursday when the company reported a 17 percent increase in fourth-quarter profit after a long lackluster performance.
Net income was $1.66 billion, or $1.06 a share, lifted by higher prices for the company’s products, significant investments in marketing of crucial brands like Pepsi and Lay’s and strong sales in Latin America and other emerging markets. Earnings were $1.42 billion, or 89 cents a share, in the period a year earlier.
Signs that PepsiCo was moving out of what Indra K. Nooyi, the chief executive, called a transition year — as well as her announcement on a call with analysts that the company plans to apply to the Food and Drug Administration for approval of a new, lower-calorie sweetener — moved it share price up more than $2 by midday before it closed at $72.28, up 78 cents.
“It was an encouraging quarter,” said Kevin V. Dreyer, associate portfolio manager of the $2 billion Gabelli Asset Fund, which owns PepsiCo shares. “It looks like things might be getting a bit better.”
He said the news of Berkshire Hathaway’s purchase of Heinz for $23 billion, or more than 13 times earnings before interest, taxes, depreciation and amortization, suggested that the value of PepsiCo’s vast Frito-Lay business was higher than the company’s stock price suggested. “That other announcement may be having an impact as well,” he said.
Investors were also heartened by a slight improvement in the North American beverage business, which grew 2.5 percent in the fourth quarter even though sales of carbonated beverages were down a bit.
The company introduced several twists on various products last year, including a Gatorade chew, Doritos dressed up with new, spicier flavors and Pepsi Next, which has roughly half the calories of a regular Pepsi.
The picture for the full year that ended in December was less uplifting. Earnings of $6.18 billion, or $3.92 a share, failed to match profits of $6.44 billion, or $4.03 a share, in 2011. Revenue slipped to $65.49 billion from $66.5 billion.
Higher Prices Help PepsiCo to 17% Gain in Profit
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Higher Prices Help PepsiCo to 17% Gain in Profit
