PepsiCo, Inc. (Nasdaq: PEP ) exceeded expectations on Tuesday morning when it reported its second-quarter earnings. PepsiCo’s Frito-Lay snack business was again the shining star in the quarter, but analysts say the North American beverage business also seems to finally be improving as well.

PepsiCo reported second-quarter adjusted earnings per share of $1.61 on revenue of $16.09 billion. Both numbers topped consensus analyst estimates of $1.52 and $16.04 billion, respectively. Revenue was up 2.4 percent in the quarter. Organic revenue growth, which does not include the impact of currency fluctuations, was up 2.6 percent.

North American beverage organic revenue, a soft spot for PepsiCo in recent quarters, was down 1 percent in the quarter, a slight improvement from a 2 percent drop in the first quarter. Frito-Lay organic revenue growth was 4 percent, up from 3 percent in the first quarter.

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International revenue growth was led by Europe and sub-Saharan Africa, which grew organic sales by 7 percent.

PepsiCo also appears to have kept costs under control in the quarter. Gross margin contracted 0.2 percent and core gross margin contracted 0.35 percent. Operating margin expanded 0.25 percent and core operating margin expanded 0.05 percent.

“We are pleased with our results for the second quarter and we remain on track to achieve the financial targets we set out at the beginning of the year,” CEO Indra Nooyi says in a statement.

“The majority of our businesses performed very well, particularly our international divisions propelled by continued growth in developing and emerging markets, and our North America beverages sector posted sequential net revenue and operating profit performance improvement.”

Looking ahead, PepsiCo reiterated its full-year guidance of revenue growth of at least 2.3 percent and EPS of $5.70. PepsiCo expects full-year cash from operations of $9 billion and free cash flow of $6 billion. The company expects $7 billion in capital returns.

Bank of America analyst Bryan Spillane says second-quarter EPS exceeded his expectations by 9 cents on better-than-expected organic sales growth and operating margins.

“While Gatorade and Mountain Dew improved throughout the quarter, colas are still a work in progress,” Spillane says. “PEP has struck a healthy balance between efficiency gains, is investing to drive organic sales growth and is delivering consistent sales and earnings growth.”

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Bank of America has a “buy” rating and $125 price target for PEP stock .

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