Pepsi Issues Warning for End of Year

PepsiCo Inc.'s third-quarter net income rose 12 percent on strong sales gains abroad and strength in its drinks and Frito-Lay snacks.

The company lowered the top end of its guidance for the fiscal year because it expects to be hurt by changes in currency exchange rates.

Shares fell in premarket trading on the news, dropping $2.04, or 3 percent, to $66.07.

Pepsi said Wednesday it earned $1.92 billion, or $1.19 per share, in the three months ending Sept. 4. That compares with earnings of $1.72 billion, or $1.09 per share, in the same period last year.

Without one-time items including charges to integrate its bottlers, the company earned $1.22 per share, which is what analysts had expected, according to Thomson Reuters.

Revenue rose 40 percent to $15.51 billion on strong gains abroad and the acquisition of the company's largest North American bottlers earlier this year. Revenue beat analyst estimates of $15.38 billion.

The company completed its bottler deal for $7.8 billion earlier this year, with the goal of better controlling distribution and bring products to market more quickly. Shoppers have been pushing away from soft drinks because of health concerns and turning to juices and teas. They've also limited their purchases because of the economic downturn, so controlling the bottlers helps Pepsi keep up with these changing tastes.

The company, based in Purchase, N.Y., reported revenue gains across all of its business units, including beverages around the world and snacks, except for Quaker, which has been struggling in the U.S.

The company had previously expected earnings per share to rise between 11 percent and 13 percent for the full year, but now said the range will narrow to 11 to 12 percent. Additionally, the company expects the drag of foreign currency to hurt earnings by 1 percentage point, so it expects core earnings per share to range from 10 to 11 percent growth. Revenue from foreign countries can be affected by fluctuations in exchange rates when they are converted back into U.S. dollars.

Pepsi announced it was creating a new Global Nutrition Group so it can create new products. It announced earlier this year it will cut sodium, sugar and certain fats in many of its products, including chips in its Frito-Lay snack division, to feed into people's desire for healthier products. Earlier this year, the company said it was setting out to triple its sales of healthier fare in the next decade to $30 billion,

The company has plans to cut sodium by one-fourth in key brands in five years, and cut sugar per serving in drinks by 25 percent in the next 10 years.

The nutrition group will be based in Chicago. The company's chief scientific officer, Mehmood Khan, has been named CEO.