Shares of Pepsi Bottling Group (NYSE:PBG) are off to a solid start in 2007 and up just over 11% year to date. The company is set to release second-quarter results tomorrow and offer further insight into how the rest of the year is shaping up.  

What analysts say:

  • Buy, sell, or waffle? Fifteen analysts currently follow Pepsi Bottling. Four are bullish, one isn't, and the rest can't make up their minds and rate it hold.
  • Revenues. Analysts are projecting second-quarter sales of $3.3 billion, or 4.8% ahead of last year's number.
  • Earnings. Analysts project quarterly earnings of $0.63, for a year-over-year improvement of 3.3%.

What management says:
Back when the company released first-quarter results, it said it expected 1%-2% global case volume growth for 2007, made up of "flat to up one percent" growth in the United States and Canada. Management expects this to trickle down to $1.90-$1.98 in full-year diluted earnings and is also calling for operating cash flow of $530 million-$550 million, or $2.27-$2.36 per share.

What management does:
Management runs a tight ship and has been able to grow sales and earnings in the high single digits on average over the past five years. It also keeps a tight lid on costs, and though net margins are razor thin, has pushed them up more than 4% again recently.

Margins

11/05

02/06

05/06

08/06

11/06

02/07

Gross

47.4%

47.1%

46.9%

46.7%

46.5%

46.4%

Operating

8.2%

8.2%

8.2%

8.2%

8.5%

8.4%

Net

3.9%

3.8%

3.7%

3.7%

4.1%

4%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
There's little doubt that Pepsi Bottling is a well-run firm, but bottling is a low-margin affair and very capital intensive due to the plants, equipment, and distribution facilities needed to bottle and transport beverages for PepsiCo (NYSE:PEP), which happens to own some 38% of Pepsi Bottling and has even more voting control.

Coca Cola (NYSE:KO) and Coca Cola Bottling (NASDAQ:COKE) have a similar arrangement, so one strategy may be to invest directly in Pepsi and Coca Cola to gain exposure to the bottlers and the faster-growing, higher-margin parent companies, not to mention Pepsi's lucrative snack food franchise.

For more related Foolishness:

Coca-Cola is a member of the Motley Fool Inside Value portfolio.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.