(Reuters) ? PepsiCo Inc (PEP.N) posted a slightly better than expected quarterly profit and affirmed its full-year goal despite a smaller boost from foreign exchange, sending its shares up more than 3 percent in morning trading.
The maker of Pepsi-Cola, Lays potato chips and Quaker oatmeal cited a lower tax rate and cost-savings from acquisitions, which will help it endure higher costs for commodities including corn and wheat and weak consumer spending.
The company also received help from price increases, which it said did not hurt demand as much as expected in its snack business.
In addition to price increases put though during the just-ended third quarter, PepsiCo said on Wednesday it would consider more increases in the fourth quarter to help offset the impact of higher commodity costs.
(For a graphic on PepsiCo's results, click here: http://link.reuters.com/kuh44s)
PepsiCo executives also sought to quell recent speculation on Wall Street about a possible breakup of the company, saying it has considered that option and does not find it to be in shareholders' best interest.
"I've looked at every single scenario you could probably come up with in terms of how PepsiCo's portfolio is constructed," Chief Financial Officer Hugh Johnston told reporters. "Taking it apart, I know, would be very, very costly and I really don't see the benefit in doing it."
He said the company benefits from having both a snacks and drinks business in areas such as back-office operations, research and development and procurement, even if the snacks and drinks are not being delivered on the same trucks in all markets.
STANDING BY '11 OUTLOOK
PepsiCo stood by its full-year outlook, which calls for 2011 earnings to grow at a high single-digit rate. But because of a recent strengthening of the U.S. dollar, that forecast now only includes a 1 percentage-point boost from foreign exchange, whereas the company earlier expected a 2-point boost.
The new forecast implies underlying profit growth of 6 percent to 8 percent for the year, said Stifel Nicolaus analyst Mark Swartzberg, up from 5 to 7 percent growth earlier.
Still, Swartzberg stuck by his "hold" rating on the shares, saying that he does not expect the stock to move significantly higher until the company's strategy and execution, especially in the Americas beverages business, improve.
The company also stood by its forecast for commodity inflation to be at the high end of its $1.4 billion to $1.6 billion range.
Even though corn prices have come down significantly in September, PepsiCo has not seen a change in its costs, because it locked in prices with forward purchasing contracts, Johnston said. He also emphasized that no single commodity makes up more than 10 percent of total purchases.
PepsiCo also said it expects about $2.5 billion in share buybacks this year.
In the third quarter, net income rose to $2.0 billion, or $1.25 per share, from $1.92 billion, or $1.19 per share a year earlier.
Excluding items, earnings were $1.31 per share, topping analysts' average estimate by a penny, according to Thomson Reuters I/B/E/S.
Revenue climbed to $17.58 billion from $15.51 billion a year ago. Analysts on average were expecting $17.18 billion.
The company's shares were up 3.2 percent at $62.88 at midmorning on Wednesday on the New York Stock Exchange.
(Reporting by Martinne Geller in New York; Editing by Maureen Bavdek, Dave Zimmerman and Matthew Lewis)
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