Earnings Rise, But Pepsico Still Planning Spin-Offs

PepsiCo Inc.’s earnings rose an unexpectedly strong 8 percent in the first quarter, fueled by improvement in domestic soft drinks and its global snack food and restaurant businesses.

Its stock shot up 10 percent Thursday, climbing $3.12-1/2 to close at $34.37-1/2 a share on the New York Stock Exchange. The stock rose another 62-1/2 cents Friday, finishing the week at $34.87-1/2.

PepsiCo, based in Purchase, N.Y., also said it was moving ahead with plans to spin off its major fast-food chains - Pizza Hut, Taco Bell and KFC into a separate company and to sell several smaller restaurant businesses.

Earnings in the three months ended March 22 rose to $427 million, or 27 cents a share, from $394 million, or 24 cents a share, a year earlier.

The results were 3 cents a share higher than the 24 cents that analysts surveyed by First Call had expected.

“They are back on the road to growth,” said Emanuel Goldman, who follows the company for PaineWebber in San Francisco.

Revenue rose 2 percent to $6.70 billion from $6.55 billion.

The domestic soft drink business posted a 3 percent increase in operating profit as case sales by its bottlers rose 6 percent, led by growth in its Mountain Dew and Pepsi brands. Sales growth was driven by lower prices as reduced take-home packaging costs were passed on to the consumer, PepsiCo said.

The company’s international beverage operations posted a wider loss for the quarter as sales volume fell 3 percent. But the company said the sales decline was smaller than in the fourth quarter of 1996, reflecting the resumption of business in Venezuela, where it unexpectedly lost its long-time bottler to Coca-Cola last year.

PaineWebber’s Goldman said the $27 million operating loss for the international beverage business was about half of what some analysts had expected.

The Frito-Lay snack foods business posted double-digit gains in operating profits both domestically and overseas. Domestic sales revenue rose 7 percent on a combination of higher prices and more volume.

In the restaurant business, profits rose 7 percent worldwide due to 22 percent growth overseas and a 6 percent increase domestically.

In the United States, restaurant sales fell 2 percent. Sales for KFC and Taco Bell stores open a year or more rose while Pizza Hut sales were off 8 percent. PepsiCo said Pizza Hut suffered from comparison with a results a year ago, when it introduced the Triple Decker pizza.

Goldman said it was the first increase for Taco Bell in 10 quarters. It was the fourth straight quarterly decline for Pizza Hut.

Some of the stocks that moved substantially or traded heavily Friday:

NYSE

Fisher Scientific International, down $5.37-1/2 at $36.75.

The Hampton, N.H.-based company reported first-quarter earnings that were shy of Wall Street’s expectations. Fisher provides a variety of products and services to research, healthcare, industrial, educational and government markets.

National Processing, up $1.50 at $8.50.

National City, a Cleveland bank, plans to raise its stake in National Processing to 89 percent from about 85 percent by buying 2 million shares on the open market. National Processing, based in Louisville, Ky., provides processing services for credit cards, checks and airline tickets.

NASDAQ

PetsMart, down $3.81-1/4 at $12.12-1/2.

Dow Jones News Service reported that the investment firm of Donaldson Lufkin & Jenrette Securities removed the retailer of pet food and supplies from its recommended list.

Invacare, down $2 at $18.12-1/2.

The Elyria, Ohio-based maker of home medical equipment reported late Thursday that its 1997 results will be shy of analyst forecasts.