PepsiCo 4Q Net Income Falls; Cuts Outlook

PORTLAND, Ore. (AP) - PepsiCo Inc. lost some fizz Thursday, offering a weak outlook for the year as it saw tough competition, a challenging economy and higher ingredient costs ahead.

The outlook disappointed investors and sent shares down.

It comes as the company faces pressure to deliver improved results after spending nearly $11 billion on three acquisitions and making big investments in other strategies.

The company also reported a dip in its fourth-quarter net income, but adjusted earnings beat expectations by a penny.

Pepsi reported that its net income fell to $1.37 billion, or 85 cents per share, for the quarter. That's down from $1.43 billion, or 90 cents per share, last year.

Excluding the impact of several one-time items, the company earned $1.05 per share, beating analyst estimates of $1.04, according to FactSet.

Revenue rose 37 percent to $18.16 billion as sales volume grew and it benefited from the acquisition of two of its biggest bottlers.

Pepsi's CEO, Indra Nooyi, said the acquisition of two bottlers and push to expand in emerging markets will strengthen its business. But Pepsi also took a cautious tone for the rest of the year.

Company leaders said consumers are still feeling pressured by high unemployment. The company, like many of its peers, is also facing major increases in costs for corn and other ingredients - volatile factors that threaten its profitability.

Pepsi is trying to increase productivity to offset those expenses and doesn't want to raise prices, which could shock cautious consumers.

Pepsi, based in Purchase, N.Y., said it expects the purchase of its bottlers and its push in emerging markets, which includes its $3.8 billion acquisition of Russian food company Wimm-Bill-Dann Foods, will help its business in the long term.

The company lowered its outlook for the fiscal year, saying it expects earnings per share growth of 7 percent to 8 percent. It previously forecast growth of 10 percent to 11 percent.

While Pepsi leaders said they are optimistic, their take on conditions were much darker than some competitors'. Other food, beverage and consumer product companies are saying the worst of the economy seems to behind them and while they are also struggling with the impact of higher commodity costs, most are raising prices to cope.

The news also comes a day after its top competitor, Coca-Cola Co. reported its net income tripled for the most recent quarter on the acquisition of a bottler and stronger sales of its drinks worldwide.

Beverage companies acquire bottlers to control costs and distribution while being able to change product lineups more quickly.

Investors have criticized Pepsi for spending heavily on the acquisitions, nutrition product development and push in emerging markets at the cost of short-term profitability.

"Investors aren't going to give them the benefit of the doubt like they have before," said Jack Russo, an analyst for Edward Jones.

The company, Russo said, has good brands and is well-positioned in key overseas markets. It has been in such an intense acquisition mode that it needs to prove the benefit of those investments now.

Shares fell $1.06 to close at $63.36 Thursday.

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AP Business Writer Mae Anderson contributed to this report from New York.