Snack sends Pepsi sales soaring; stock rises

PepsiCo hits all-time high

PepsiCo Inc (PEP.N) reported a better-than-expected profit for the second quarter on Thursday, buoyed by lower raw material costs and higher demand for Frito-Lay snacks and new beverages in North America.

PepsiCo's shares rose 1.3 percent to $107.35 in premarket trading, setting up shares of the maker of Pepsi, Gatorade and Tropicana to scale a record high in regular trading. Pepsi also boosted its forecast for adjusted profit for the year.

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New drinks such as Propel flavored water and Naked Cold Pressed juice, Smartfood Popcorn and snacks under its "Simply" brand helped drive sales, the company said.

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UNITED STATES - SEPTEMBER 29: Bottle of Gatorade are displayed on a shelf in an Associated Supermarket in New York Thursday, September 29, 2005. PepsiCo Inc., the world's No. 2 soft-drink maker, reported the biggest quarterly sales gain in 3 1/2 years as hot weather spurred demand for Gatorade sports drinks and Aquafina waters in the U.S. (Photo by Ramin Talaie/Bloomberg via Getty Images)
UNITED STATES - FEBRUARY 08: A bag of Fritos is displayed along with Fritos corn chips in New York Thursday, Feb. 8, 2007. PepsiCo Inc., the world's second-largest soft-drink maker, said fourth-quarter profit rose on a tax gain and overseas sales of Frito-Lay snacks. North American beverage volume had the smallest increase in six quarters. (Photo by Alicia Hansen/Bloomberg via Getty Images)
NILES, IL - DECEMBER 1: Cartons of Tropicana orange juice lie in a grocery store display December 1, 2004 in Niles, Illinois. Tropicana orange juice prices are expected to rise due to the hurricane-damaged citrus crop in Florida. (Photo by Tim Boyle/Getty Images)
NEW YORK, NY - APRIL 09: Cases of Sabra Classic Hummus are viewed on the shelf of a grocery store on April 9, 2015 in New York City. Sabra Dipping Co. is recalling 30,000 cases of hummus due to possible contamination with Listeria, the U.S. Food and Drug Administration said Wednesday. (Photo by Spencer Platt/Getty Images)
Bottles of PepsiCo Inc. Naked brand juice smoothies are arranged for a photograph in Tiskilwa, Illinois, U.S., on Thursday, July 2, 2015. PepsiCo Inc. is expected to report quarterly earnings on July 9, 2015. Photographer: Daniel Acker/Bloomberg via Getty Images
Quaker instant oatmeal
Doritos potato chips
UNITED STATES - JULY 09: Bags of Lays potato chips sit on display in an Associated Supermarket in New York on July 9, 2007. (Photo by Andrew Burton/Bloomberg via Getty Images)
NEW YORK, NY - FEBRUARY 16: Aquafina water seen on Day 6 of New York Fashion Week: The Shows on February 16, 2016 in New York City. (Photo by Mike Coppola/Getty Images for NYFW: The Shows)

PepsiCo and other food companies are spending more to develop new products to meet the changing tastes of consumers who are increasingly seeking healthier drink and snack options.

"The North American strength is a big driver behind raising guidance for the year because North America really is performing strongly right now," Hugh Johnston, PepsiCo's chief financial officer told Reuters.

Pepsi has doubled its research and development spending over the last 5 years and new products now account for 9 percent of PepsiCo's revenue, up from 5 percent in past years, Johnston said.

PepsiCo's cost of sales fell 6 percent in the three months ended June 11.

That helped net income attributable to PepsiCo increase 1.3 percent to $2.01 billion, or $1.38 a share.

Excluding items, the company earned $1.35 per share, beating the average analyst estimate of $1.30, according to Thomson Reuters I/B/E/S.

Net revenue fell 3.3 percent to $15.395 billion, but inched past the average analyst estimate of $15.37 billion.

Net revenue in the North America Beverages unit, PepsiCo's biggest business, rose 1 percent – the slowest growth since the company started breaking out beverage sales from the region a year ago.

Revenue from the Frito-Lay business, which includes Doritos, Lay's and the Simply line of snacks, rose 3 percent. New snacks launched under the Simply brand included Simply Tostitos black bean chips and organic chunky medium salsa.

PepsiCo said it now expects 2016 adjusted earnings of $4.71 per share, up from its previous forecast of $4.66 per share.

(Reporting by Sruthi Ramakrishnan in Bengaluru and Melissa Fares in New York; Editing by Savio D'Souza and Bernadette Baum)

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