PepsiCo shares jumped to a record high on Wednesday after the company reported better-than-expected earnings, driven by the performance of its Frito-Lay snacks division.
Frito-Lay sales rose 5.5% in the first quarter while Pepsi’s North American beverage sales grew 2%, reflecting in part a 4% price increase. It was the third straight quarter of growth after sales of such sugary drinks as Gatorade and Mountain Dew had slumped.
“Our North America beverage businesses really has been strengthening over the past couple of quarters as we’ve strengthened advertising, we’ve strengthened execution,” PepsiCo CFO Hugh Johnston told CNBC. “The portfolio is working and you see stepped-up execution from investments in the business.”
PepsiCo’s overall revenue rose 2.6% to $12.88 billion in the first quarter and adjusted earnings came in at 97 cents per share. Analysts were expecting profit of 92 cents per share and revenue of $12.70 billion.
On news of the earnings, PepsiCo shares rose 3.3% to $126.46.
“Frito-Lay North America and each of our international divisions delivered particularly strong operating performance, and PepsiCo Beverages North America generated sequential quarterly net revenue acceleration,” CEO Ramon Laguarta said in a news release.
“We are equally pleased with the progress we are making on our ambitious agenda to invest to build capabilities, strengthen our brands, and add capacity to grow,” he added.
As Reuters reports, “Beverage and packaged food companies have been under pressure from changing consumer preferences and Pepsi has responded by coming up with new recipes and using better ingredients for its snacks and sodas.”
The company has also been spending more on marketing and advertising to boost sales. Laguarta said the investments in Pepsi and Gatorade are already paying off, but the company expects to focus more on Mountain Dew this year.
“I’m confident that we’ll see performance improvements in the next quarters in Dew,” he said.
To balance the investment spending, PepsiCo is planning to slash at least $1 billion in costs every year through 2023, which will include eliminating jobs that can be replaced by automation.