PepsiCo shares rallied Tuesday after the company’s second-quarter earnings beat estimates. Earnings per share were $1.54, adjusted, vs. $1.50 expected. Healthier snacks and Bubly sparkling water helped drive incremental sales growth and offset a drag from foreign exchange.
PepsiCo CFO Hugh Johnston described the success on CNBC saying, “It really is very broad-based. I think we are seeing terrific results out of our Frito-Lay North America business, that’s seen a real acceleration there. North America beverages clearly doing better, and all of our international businesses performing well, developing and emerging markets growing about 8%.”
The American multinational food, snack, and beverage corporation’s reinvestment in the business is what Johnston feels is driving the company’s success.
“I think a couple of things are driving it. Number one we are investing back into the business in the form of advertising and marketing behind our brand, and in the form of selling capacity, to ensure we get good execution out in the marketplace. And as a result, we are seeing very quick responsiveness. What I think is just as important though, is that we are not just investing to grow faster now but we are investing to be stronger over time, whether that’s in manufacturing capacity or digital capability. So we really feel like this is a sustained higher level of growth, not just a higher level of growth for the moment,” the CFO explained.
One new addition to the Pepsico line of products is Bubly, a flavored water beverage.
According to Pepsico, “Bubly is an unsweetened sparkling water that playfully instigates fun and positivity in everyday life. Available in 12 flavors, bubly sparkling water pairs crisp, sparkling water with natural fruit flavors to provide a delicious taste with no calories, no sweeteners, all smiles.”
Johnston beleives the strong R&D and vast available market space offers Pepsico ample opportunities for continued growth.
“I think if you do high quality research and understand what the consumer really wants, and then you do some terrific marketing—I mean the brand personality that the team has created there is one of the best I think we’ve ever done. The flavors that have come out of our research organization are terrific. The execution by our field organization has been so good. This year we will probably do upwards of close to $300 million in business for something that didn’t exist a year and half ago. And as Ramon [CEO] noted, we think this could be a billion dollar plus business for us. It’s about an eleventh share of the marketplace right now, and we’re not gonna be satisfied for a long, long time. We see a ton of growth, not just in the US but globally for that matter,” he added.
Investors who would like to utilize ETFs as a way of participating in Pepsico’s predicted growth can try the Consumer Staples Select Sector SPDR Fund (XLF) or the Fidelity MSCI Consumer Staples Index ETF (FSTA), both of which have a large allocation of the stock.
For more ETF plays, visit ETFtrends.com.