| As of Friday, July 31st: |
Since the start of the quarter, the Q2 growth rate has risen from -31.7% to -29.5%. (Data provided by Thomson Reuters)
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PepsiCo posted a bigger-than-expected quarterly profit, helped by growth in its international business, but revenue fell short of expectations as North American beverage sales fell, putting pressure on the company to close deals to buy its two big U.S. bottlers.
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The maker of Pepsi-Cola and other sodas, Tropicana juices and Gatorade sports drinks reaffirmed its full-year outlook. The company did not discuss its unsolicited takeover bids for Pepsi Bottling Group [PBG
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]Inc and PepsiAmericas [PAS
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], spurned as too low by both bottlers. CEO Indra Nooyi also declined to talk about the pending offers on a conference call with analysts.
"These results really underscore the need to address the weakness in the North American drinks unit," said Morningstar analyst Phil Gorham. "I think that will probably lead to an increased bid, sooner rather than later," for the bottling businesses.
PepsiCo [PEP
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]second-quarter net income slipped 2.3 percent to $1.66 billion, or $1.06 a share, from $1.70 billion, or $1.05 a share, a year earlier. The number of shares outstanding was lower in the most recent quarter.
Excluding one-time items, PepsiCo earned $1.02 a share, two cents better than the average Wall Street forecast, according to Reuters Estimates.
Net revenue fell 3 percent from a year ago to $10.59 billion, below the $10.95 billion analysts had expected.
Revenue rose 9 percent in the North American food business and 12 percent in its international business, but fell 7 percent in the North American drinks business.
Chief Financial Officer Richard Goodman said currency exchange rates pressured profit by 8 percentage points. Overall revenue rose 5.5 percent on a constant currency basis.
PepsiCo's results come a day after rival Coca-Cola [KO
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]Co reported a better-than-expected quarterly profit, aided by cost cuts and emerging market growth, but saw its shares slip after revenue was lighter than anticipated.
PepsiCo said sales by volume rose 1 percent.
PepsiCo said its outlook does not include the impact of the proposed deals for the bottlers and that it would not repurchase company stock until their resolution. The company said it did not buy back shares in the first two quarters.
Analysts expect PepsiCo to raise its bids for the bottlers, despite assurances from the company it would maintain a "disciplined approach" and signaled it could walk away from the offers.
The company Wednesday reaffirmed its full-year outlook, which calls for net revenue and core earnings per share to rise at a mid-to-high-single-digit percent rate on a constant currency basis. Its 2008 core earnings were $3.68 a share.
It said it now expects foreign exchange rates to hurt full-year core earnings on a constant currency basis by roughly 6 percent. That is down from the high single digits it previously forecast, Goodman said.
"We're being cautious," Goodman said in a telephone interview, about the weak economy. "There are obviously some green shoots out there and that's good news, but consumers are also being very cautious in their spending."
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