Pepsi Outlook: 'Reduced' vs. 'Tightening'

The headline numbers for PepsiCo look solid. They met expectations on the bottom line with a profit of $1.22 per share, and revenue was better than estimates at $15.51 billion.

But on the conference call, most of the analyst questions focused on the guidance.

Heading into Thursday's earnings report, the company guided earnings per share to rise between 11 and 13 percent for the full year. That was changed to 11-to-12 percent, and then with currency fluctuations, it could fall another percentage point.

Pepsi cans
Pepsi cans

Analysts and the media call it "reduced" guidance, but executives on the conference call, including Chief Executive Indra Nooyi, repeatedly said it was a "tightening" of guidance.

It's a seemingly irrelevant nuance, but the semantics mean the difference betweened a perceived weakening in growth or a simple matter of added clarity on the numbers.

"I am troubled by the term 'reduction in guidance,'" said Nooyi after an analyst referenced it that way. "We are tightening it."

"I really question the characterization of anything not delivering as we expected," said Chief Financial Officer Hugh Johnston.

"We are now (still) staying within range of 11-13 percent. No big change from our standpoint."

That settles that.

A few other interesting things to share from the call.

- There has been a sharp contrast drawn between investments made in emerging markets and those made in the developed world.

Moves made in China and India are not expected to create an immediate impact on operating results, whereas in places like the U.S., a little investment can often lead to a quick and direct pop in sales.

"When you spend in are not going to get the profitability impact in the next 12 or 24 months," said Nooyi, who was recently placed No. 6 on Forbes' list of the 100 most powerful women in the world. "It takes a longer time ... But it's must-investment market."

- Gatorade continues its resurgence, further helped by a shift in how it is distributed.

- The company is forming a global nutrition group, which will be based in Chicago. It will focus on developing new products that consist of healthier foods like fruits, vegetables and dairy. Pepsi expects the group to have $30 billion in revenues by 2020.

- The thesis that Europe and the U.S. is sluggish, while emerging markets are showing strength remains in place. In fact, Nooyi referred to the world outside of Europe/U.S. as ranging from "improving to buoyant."

- Johnston called the re-launch of Pepsi Max as "off to a great start" and that the product push would continue into the Super Bowl ad blitz.

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