Pepsi Aces Pop Quiz

"I'd like to buy the world a Coke," as the old marketing jingle goes. (The name of the sponsor escapes me ...) But today, PepsiCo (NYSE: PEP  ) should be buying a round for the global consumer, for -- pardon my French -- pulling Pepsi's Fritos out of the fire in 2007.

That's my take on yesterday's fiscal 2007 earnings report from the global pop 'n' chips powerhouse. Overall, Pepsi produced respectable results last year:

  • Revenue rose 12%.
  • Operating profit increased 10% (on margins squeezed by continuing pressure from rising raw materials costs).
  • "Core" earnings per share rose 13% (helped by share buybacks that concentrated profits among fewer shares).
  • Actual earnings-per-share growth was limited to just 2%, for $3.41 per share, thanks to 2006 tax benefits that didn't repeat in 2007.

The world is not flat
With all due respect to The World is Flat author Tom Friedman, it ain't. For Pepsi, at least, the world is full of hills and valleys. Here in the U.S., we're living in the valley, and without some serious inclines elsewhere in the world, Pepsi's profits picture would look a lot different.

Referring to volume sales, rather than dollar sales or profits, Pepsi's PepsiCo International division posted 8% snack growth (nearly three times that of Frito-Lay North America) and 9% beverage growth (where PepsiCo Beverages North America was nearly flat).

What's more, management confided that "foreign currency translation contributed about 2 points of growth to net revenue and operating profit." In other words, most of the growth Pepsi encountered last year came from abroad. That's where the company sold more stuff, and collected payment in rock-solid currencies like the Thai baht and Croatian kuna, which apparently hold their values better than the Monopoly money we ply around these parts.

I can only imagine how much better Pepsi would have done with less resemblance to Kraft (NYSE: KFT  ) and more in common with Cadbury Schweppes (NYSE: CSG  ) and archrival Coca-Cola  (NYSE: KO  )  -- ah, that's who did the jingle! -- by collecting the majority of its revenue outside U.S. borders.

Then again, if growth rates keep following the trends we saw last year, that just might happen sooner we think.

What did we expect when we popped the top on Pepsi last quarter, and what did we get? Find out in:

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 573711, ~/Articles/ArticleHandler.aspx, 10/21/2016 8:20:58 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
PEP $105.62 Down -0.25 -0.24%
PepsiCo CAPS Rating: ****
CBY.DL2 $52.12 Down +0.00 +0.00%
Cadbury CAPS Rating: ***
KO $42.13 Up +0.20 +0.48%
Coca-Cola CAPS Rating: ****
KRFT.DL $0.00 Down +0.00 +0.00%
Kraft Foods CAPS Rating: *****