PepsiCo's 3Q profit rises on strong sales

PepsiCo Inc's third-quarter net income rose 12 per cent on strong sales gains in drinks and Frito-Lay snacks abroad, but shares fell after the company lowered the top end of its guidance because of investments to expand its presence overseas.

The company also said it expects to be hurt by changes in currency exchange rates, which happens to businesses with interests abroad.

Pepsi has been expanding in growing markets like China and India to hook shoppers as they get more money.

The moves help bolster weaker performance in developed regions like the US and Western Europe, where people are limiting their spending in down economies.

The stock fell on Thursday because short-term investors are not pleased with the increased spending, which could weaken results, said Jim Tierney, chief investment officer at W.P. Stewart, an investment management firm in New York.

But long-term investors are pleased.

"It really is the battle between short-term thinking and long-term thinking," he said. "If you think long term about this, you're happy they are continuing to invest in the future."

Investors focused on the guidance and investments during a conference call with executives. CEO Indra Nooyi stood by the company's long-term focus.

"We are going to make those investments because we have to make sure that we're looking at innovation, 24, 36 months out," she said.

In the present, the company's results met expectations and continued to benefit from PepsiCo's buyout of its two largest North American bottlers earlier this year.

Pepsi earned US$1.92 billion, or US$1.19 per share, in the three months ending September 4. That compares with earnings of US$1.72 billion, or US$1.09 per share, in the same period last year.

Without one-time items including charges to integrate its bottlers, the company earned US$1.22 per share, in line with analyst estimates, according to Thomson Reuters.

Revenue rose 40 per cent to US$15.51 billion on gains abroad and the bottler acquisition, beating analyst estimates of US$15.38 billion.

PepsiCo spent US$7.8 billion to buy its bottlers this year so it could better control distribution and be quicker to market with new products.