By Martinne Geller
NEW YORK (Reuters) - PEPSICO (PEP.NY)Inc
PepsiCo also said on Tuesday it would cut 3,300 jobs, or roughly 1.8 percent of its work force, as part of a plan to save more than $1.2 billion over three years.
The maker of Pepsi-Cola drinks, Frito-Lay snacks and Quaker foods did not give a forecast for 2009 -- which also weighed on shares due to investor uncertainty about the next year, said Morgan Stanley analyst William Pecoriello.
Net income fell to $1.58 billion, or 99 cents per share, in the third quarter ended September 6, from $1.74 billion, or $1.06 per share, a year earlier.
Excluding losses on commodity hedges, earnings were $1.06 per share. Analysts on average were expecting $1.08, according to Reuters Estimates.
Quarterly revenue rose 11 percent to $11.24 billion.
Citing a recent strengthening in the value of the U.S. dollar, the company lowered its 2008 earnings outlook to a range of $3.67 per share to $3.68 per share at current exchange rates, from a prior forecast of at least $3.72 per share, excluding items.
A nationwide housing slump, credit crunch, job losses and higher fuel costs have meant consumers are eating less often at restaurants and cutting back on trips to gasoline stations and convenience stores.
The changing habits have taken a toll on beverage sales, especially sales of bottled water, as many cash-strapped consumers turn to the tap to economize, Pepsi Chief Financial Officer Richard Goodman said in an interview.
"The beverage business was clearly the soft spot. The whole category has continued to be soft this year," Goodman said.
"The domestic beverage business is at a historically low level. I don't think there's been another year in which the industry as a whole has actually seen a volume decline, which is what we've seen," he added.
Volume for soft drinks like Pepsi, Sierra Mist and Mountain Dew fell 3 percent in North America. Noncarbonated beverage volume fell 5 percent, due to double-digit declines in water brands, which include Propel and Aquafina.
Growth at its food and international businesses helped Pepsi's total revenue rise 11 percent, but analysts said deeper concerns about commodity prices and its performance in North America weighed on its stock price.
"Although we believe valuation is attractive, we believe the net risk/reward picture is not compelling enough to aggressively buy Pepsi shares," Stifel Nicolaus analyst Mark Swartzberg said in a note, keeping a "hold" rating on Pepsi.
JOB CUTS IN TOUGH TIMES
Pepsi said that some 40 percent of the job cuts will come from closing up to six plants and other actions to be announced by the end of the year.
Most of the job cuts will occur in the fourth quarter. Pepsi expects to incur a related charge of $550 million to $600 million.
Volume in the North American beverage unit as a whole declined 4 percent. Revenue was flat and operating profit fell 11 percent, due to higher fuel costs and technology spending.
Revenue at Pepsi's food business rose 12 percent and operating profit rose 9 percent, helped by higher Frito-Lay volume and price increases to offset rising commodity costs.
International revenue rose 20 percent and profit rose 18 percent. Foreign exchange rates and recent acquisitions added 5 points to revenue growth and 4 points to profit growth.
Goodman said Pepsi's global sales for September were consistent with year-to-date numbers, and therefore were not directly affected by the widening crisis in financial markets.
Goodman said the change in 2008 outlook was entirely due to a recent surge in the value of the U.S. dollar versus other currencies and therefore was still uncertain.
"It's a little bit hard to tell exactly where we're going to be and that's why we said at current exchange rates, that the impact would be about 4 or 5 cents per share. That might change between now and the end of the year," Goodman said.
Pepsi shares fell $6.42 or 10.4 percent to $55.35 in late morning trading on the New York Stock Exchange.
(Editing by Gerald E. McCormick and Maureen Bavdek)
