PepsiCo profit meets Wall St view, sees buybacks

NEW YORK (Reuters) - PEPSICO (PEP.NY)Inc reported a quarterly profit on Friday that met Wall Street expectations and said it may buy back up to $2.5 billion of its stock this year, sending shares up 2 percent in premarket trading.

"Today if you're meeting expectations, you're almost exceeding expectations," said Hank Smith, chief investment officer of Haverford Investments, which owns shares of Pepsi. "It's the reverse of the tech/telecom heyday when meeting expectations was a disappointment."

Smith said the share repurchase plan was also encouraging, given that many other companies are canceling buybacks.

PepsiCo, the world's No. 2 maker of soft drinks, said net earnings fell, hurt by a strong dollar and lower volume in its North American drinks business, but it forecast revenue and earnings per share growth in 2009.

The stronger U.S. dollar cut PepsiCo's revenue growth by 5.5 percentage points and earnings by 5 cents per share, said the company, which also makes Mountain Dew and Sierra Mist as well as Tropicana juice, Frito-Lay snacks and Quaker oatmeal.

The stronger dollar, which lowers the value of sales from abroad, is also expected to reduce 2009 full-year profit by 8 percentage points.

Coke, which has a much wider global footprint, forecast a larger hit from currency this year, but still reported a better-than-expected profit Thursday.

PepsiCo profit fell to $719 million, or 46 cents per share, in the fourth quarter, from $1.26 billion, or 77 cents per share, a year ago. Excluding items, the company earned 88 cents per share, in line with analysts' average estimate, according to Reuters Estimates.

Revenue rose 3 percent to $12.73 billion.

WEAK TRENDS IN NORTH AMERICA

PepsiCo's overall fourth-quarter volume rose 2 percent in its snack business and 1 percent in its drinks business.

Volume rose 8 percent in its international snack business, fueled by double-digit growth in China and Russia. The international drink business gained 14 percent, helped by Pepsi's recent acquisition of Russia's biggest juice maker, Lebedyansky.

Trends in North America, where a recession has slammed the breaks on consumer spending, were much weaker. Volume fell 6 percent in the drink business and was flat in the snack business.

To appeal to cash-strapped consumers, Pepsi said it plans to add 20 percent more product into large bags of Tostitos, Fritos, Cheetos and Doritos sold in the region during the second quarter, without increasing the price.

Pepsi expects revenue and operating earnings to grow at a mid-to-high single digit rate in 2009, excluding the impact of currency exchange rates.

The first half of the year and the current first quarter in particular will present the most difficult comparisons, Pepsi said, due to higher commodity costs and currency rates.

Given current market conditions, Pepsi said it does not anticipate selling shares of its anchor bottlers Pepsi Bottling Group Inc or PepsiAmericas Inc this year, though it expects to spend up to $2.5 billion buying back its own shares, subject to market conditions.

PepsiCo expects cost savings of more than $1.2 billion over the next three years, with $350 million to $400 million in 2009.

Shares rose to $53 in premarket trading from Thursday's close at $52 on the New York Stock Exchange.

(Reporting by Martinne Geller; editing by Jeffrey Benkoe)