Better Quarterly Earnings Insufficient to Bolster Pepsi Stock

Ironically, Pepsi Bottling Group Inc. hit a three-month low on Tuesday, October 3 on the heels of a report that the company's quarterly profits were slightly better than expected. The earnings results were not sufficient to defray concerns about rising costs and their effects on the company's overall earnings outlook.

Pepsi Bottling is the largest bottler of the soft drinks produced by PepsiCo Inc. Investors pulled back from Pepsi Bottling stock on concerns over the cost of raw materials including plastic and aluminum for the beverage containers and those for the high-fructose corn syrup that goes into the production of the drink itself.

Pepsi's Chief Financial Officer Alfred Drewes said, "Over the next several weeks, we will be working with our global procurement team to finalize our raw materials costs for the upcoming year."

Pepsi Bottling shares were down 6.4 percent on the New York Stock Exchange, trading at $32.98, up from $32.50 earlier in the day. Greenberg downgraded the rating on the stock from "buy" to "hold" but continued to characterize Pepsi Bottling as "the most consistent performer in the bottling space."

Based out of Somers, New York, Pepsi Bottling reported an increase in net income to $207 million, which amounts to some 86 cents per share for the third quarter ending on September 9. At the same time last year, the company reported a net income of $205 million or 82 cents per share.

PepsiCo, the world's second largest soft drink company, owns approximately 43 percent of Pepsi Bottling. PepsiCo's quarterly revenue saw an increase of 7.6 percent, a total of $3.46 billion.

Soft drink companies in the United States are faced with wooing consumers back to carbonated beverages after increased sales of noncarbonated drinks including Lipton Iced Teas, Aquafina sparkling water, and SoBe Life Water. Starbucks Frappuccinos and a variety of energy drinks are also strong contenders in the beverage market.