PepsiCo beats profit estimates, sets $12 billion buyback plan

(Reuters) - PEPSICO (PEP.NY)Inc reported a better-than-expected quarterly profit, helped by higher sales at its Frito-Lay snack business, and said it would buy back shares worth up to $12 billion by 2018.

Shares of the company, which has been under pressure from activist investor Nelson Peltz, were up more than 3 percent in premarket trading on Wednesday.

Pepsi also hiked its annual dividend by 7.3 percent to $2.81 per share and said it expects to return about $8.5-$9 billion to shareholders through dividends and buybacks this year.

Peltz's Trian Fund Management has been pushing Pepsi for about two years to separate its flourishing snack division from its beverage business to make two leaner and more entrepreneurial companies.

Sales in Pepsi's North American snack business rose 3 percent. The business, which accounted for 21 percent of total sales in fiscal 2013, has been a bright spot for the company, helping its stock vastly outperform that of larger rival Coca-Cola Co in the past year.

"We have momentum," Chief Financial Officer Hugh Johnston told Reuters, noting the company's growth with retailers in the United States. "We are absolutely rolling right now."

Johnston, however, said macroeconomic conditions remained tough and that the stronger dollar was a challenge for everybody.

The dollar has surged about 20 percent against a basket of major currencies, making overseas sales denominated in other currencies less valuable in dollar terms.

Pepsi's net revenue for the fourth quarter ended Dec. 27 fell about 1 percent to $19.95 billion, hurt mainly by a stronger dollar.

Net income attributable to the company fell to $1.31 billion, or 87 cents per share, in the quarter, from $1.74 billion, or $1.12 per share.

Excluding items the company earned $1.12 per share.

Analysts on average expected profit of $1.08 per share on revenue of $19.66 billion, according to Thomson Reuters I/B/E/S.

Shares of the Purchase-New York based company were trading at $100.01 before the bell. They closed at $97.99 on the New York Stock Exchange on Tuesday.

(Editing by Maju Samuel and Saumyadeb Chakrabarty)