Pepsi Bottler’s Outlook Drags Down Sector

Pepsi Bottling Group Inc. took the pop out of soft drink stocks Tuesday with a modestly disappointing earnings outlook.

The No. 1 bottler and distributor of Pepsi soft drinks said its second-quarter profit rose 14% despite some cool weather, but the firm said third- and fourth-quarter results could be below expectations.

The company’s shares dived $4.64, or 14%, to $27.75 on the New York Stock Exchange.

The report also dragged down PepsiCo Inc., which fell $3.58, or 7.3%, to $45.27, also on the NYSE.

Soft drink stocks had been among the market’s best performers in winter and spring, as many investors hunted for relative “safe-haven” shares as technology stocks continued to dive.

On Tuesday, Pepsi Bottling said its cold-drink sales volume during the second quarter was essentially flat because of cooler than normal temperatures in parts of North America.

Competitive pricing in select international markets also put a damper on results, Chairman Craig Weatherup said.

Even so, the Somers, N.Y.-based company said it earned $139 million, or 47 cents a share, in the quarter ended June 15, compared with $122 million, or 41 cents, a year earlier. Net revenue rose 7.3% to $2.21 billion.

The average estimate of analysts polled by earnings tracker Thomson First Call was 47 cents.

The company said it still expects 2002 worldwide volume sales to increase 3% and prices to rise 3%, driving cash flow higher. But net profit for the year will be $1.41 to $1.45 a share, the firm said. The average estimate of analysts was $1.46, Thomson First Call said.

“I think the market has significantly overreacted,” said J.P. Morgan analyst John Faucher.

But at brokerage UBS Warburg, analyst Caroline Levy cut her ratings on Pepsi Bottling and PepsiCo to “buy” from “strong buy.”

“It’s just a sense that this company, which has basically exceeded expectations each quarter since it went public [in 1999], is becoming more of an in-line performer,” Levy said.

Among soft drink rivals, bottling giant Coca-Cola Enterprises fell $1, to $20.75, and Coca-Cola Co. eased 84 cents, to $56.44, on the NYSE.