Earnings Preview: PepsiCo to report 1Q Thursday

Earnings Preview: PepsiCo's first-quarter results give peek at restructuring efforts

Associated Press

NEW YORK (AP) -- PepsiCo Inc.'s first-quarter results on Thursday should give investors an early glimpse of how the food-and-beverage giant is faring in its plans to refresh its business.

WHAT TO WATCH FOR: CEO Indra Nooyi has said 2012 will be a "transitional year" as PepsiCo looks to plow more money into advertising for its flagship brands, particularly in North America where it has lost market share to The Coca-Cola Co. in recent years. But the revival plans come as PepsiCo is being squeezed by another year of rising commodity costs.

WHY IT MATTERS: PepsiCo has a vast and diverse portfolio of brands, including Quaker Oats, Tropicana juice and Gatorade. Its Frito-Lay unit also makes it the world's biggest savory snacks maker. Still, the company is often judged by its second-place status to Coca-Cola and investors have criticized PepsiCo for letting sales of its namesake cola go flat.

In 2010, Pepsi was knocked off its No. 2 perch among sodas in the United States by Diet Coke, with Coke remaining in the No. 1 spot, according to the industry tracker Beverage Digest. To strengthen its position at home and abroad, PepsiCo is planning a slate of major ad campaigns for this summer. But the efforts may be drowned out by Coca-Cola's own sponsorship of the summer Olympics in London.

PepsiCo says its increased marketing dollars will be financed in part by a cost-cutting program, which includes a 3 percent reduction in its global work force of 300,000. The broader restructuring is expected to save $1.5 billion by 2014.

The long-term savings come with an upfront price; PepsiCo says it will take $425 million in charges this year as a result and another $100 million between 2013 and 2015. The company has also lowered the bar for the year, saying it expects adjusted earnings to fall 5 percent.

Like food and beverage companies industrywide, PepsiCo is also racing to strengthen its foothold in the emerging markets that will be critical for its long-term growth. Last month, PepsiCo received regulatory approvals to secure a stake in Tingyi Holding Corp., a drink maker based in Taiwan. The deal triples PepsiCo's manufacturing scale in China.

WHAT'S EXPECTED: Analysts on average expect PepsiCo to report earnings of 66 cents per share on revenue of $12.4 billion for the quarter, according to FactSet.

LAST YEAR'S QUARTER: PepsiCo, based in Purchase, N.Y., earned $1.14 billion, or 71 cents per share, on revenue of $11.9 billion in the year-ago quarter. Not including one-time items, it earned 74 cents per share.

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