PepsiCo keeps 2012 outlook despite quarterly beat

PepsiCo Inc stood by its full-year forecast on Wednesday despite beating earnings expectations in the third quarter as it pours money back into its business.

The maker of Diet Pepsi, Frito-Lay snacks and Tropicana orange juice also reported weaker-than-expected revenue, hurt by the stronger U.S. dollar and the exit of certain businesses.

Its shares moved higher in early trading.

PepsiCo is rounding out a transition year in 2012. It ramped up marketing and streamlined its workforce and portfolio to improve performance, particularly that of North American drinks, which had lagged those of Coca-Cola .

In the just-ended third quarter, sales in that business were hurt by decisions to stop selling unprofitable drinks, including some juices and bottled water packages where Chief Executive Indra Nooyi said there was "a hell of a price war."

"We won't chase volume growth at all costs," Nooyi told analysts. She said moving forward, PepsiCo would focus on categories that were growing profitably.

Third-quarter net income was $1.90 billion, or $1.21 per share, down from $2.00 billion, or $1.25 per share, a year earlier.

Excluding restructuring and other charges and a gain on commodity hedges, earnings were $1.20 per share. On that basis, analysts on average were expecting $1.16 per share, according to Thomson Reuters I/B/E/S.

Revenue fell 5 percent to $16.65 billion, below analysts' average estimate of $16.90 billion.

Excluding the impacts of currency fluctuations and the refranchising of its bottling businesses in China and Mexico, revenue grew 5 percent, reflecting 1 percentage point of volume growth and 4 percentage points from price increases.

The results come a day after Coca-Cola also reported weaker-than-expected revenue, hurt by declines in Europe and the Pacific region.

In the third quarter, overall sales volume rose 6 percent in the snack business, after acquisitions lifted sales in Latin America. In North America, volume rose 1 percent at Frito-Lay and 2 percent at Quaker Foods.

PepsiCo's Americas Beverage business saw volume fall 3 percent.

The company also affirmed its full-year outlook, which calls for earnings per share to fall 5 percent from the $4.40 it earned in 2011, and revenue to increase by a low single-digit rate reflecting the changes in China and Mexico.

The company has incurred restructuring charges of $193 million through the third quarter related to a productivity program. It expects additional charges of $205 million in the remainder of 2012, and $129 million from 2013 through 2015.

So far this year, the company has also introduced Pepsi Next, a mid-calorie cola, and started a new global marketing campaign for its flagship Pepsi brand.

PepsiCo shares gained about 35 cents to $70.65 in early New York Stock Exchange trading.

(Reporting By Martinne Geller in New York; Editing by Maureen Bavdek)