Pepsico (PEP) Sinks 9% On Weak Results

Shares of Pepsico, Inc. (NYSE: PEP) are 9% lower today after reporting disappointing third quarter results this morning. Pepsico's results were adversely impacted by continued weakness in the U.S. liquid refreshment beverage category, although worldwide snacks and international beverage businesses did well.

Pepsico reported Q3 EPS of $1.06, excluding items, which was below the consensus of $1.08. Revenues for the quarter came in at $11.24 billion, versus the consensus of $11.22 billion.

Pepsico also issued cautious guidance. The company sees FY08 EPS of $3.67-$3.68, ex-items, versus the consensus of $3.74.

Pepsico is putting in place a productivity program which is expected to produce pre-tax savings of more than $1.2 billion over the next 3 years with $350 million - $400 million of cost savings flowing through in 2009. As part of the program, Pepsico will cut 3,300 jobs, taking a pretax charge of $550-$600 million.

Specific areas of weakness for Pepsico were North American unflavored water, which saw volume fall 5%, and North American carbonated soft drinks, which had a 3% volume decline. Gatorade volume also fell in the low-single-digits, although Gatorade gained market share in the sports drink category.

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