Like a bottle of soda left uncapped for too long, PepsiCo (NYSE:PEP) shares continue to lose their fizz today, down nearly 3% since the company reported its third-quarter earnings on Thursday.

Not that the news was bad. The purveyor of soda and salty snacks met estimates for sales and beat estimates for quarterly earnings, turning in $0.99 in "core" earnings and a net profit of $1.06 per share.

Credit countries other than the United States for much of the success. The company closed its acquisition of Sandora in Ukraine, and foreign partnerships with Starbucks (NASDAQ:SBUX) and Unilever (NYSE:UL) were also described as "successful." In terms of guidance, Pepsi reiterated its past report that "core" earnings would meet or beat $3.35 per share and that it would generate about $4.4 billion in free cash flow.

So what's not to like?
I'm just guessing here on what big-picture view Wall Street took last week, but I suspect that the Pepsi sellers' thinking went something like this: Pepsi earned more money than predicted when it grew its per-share profits by 19%. Therefore, all other things remaining equal, the company should have raised guidance for the year. That it didn't suggests that the last quarter remaining in the year will show worse profits than previously expected.

Logical. It also seems supported by the numbers shown on Pepsi's income statement. Specifically, sales grew 11% as the company was able to push through some price increases, but the cost of goods sold rose nearly 13% year over year. As a result, Pepsi's gross margin is declining about 50 basis points -- continuing the long-term trend we examined last week. But it remains to be seen whether the raw-material costs that squeezed Pepsi last week will hurt Coca-Cola (NYSE:KO) when it reports on Wednesday.

Meanwhile, the company was unable to cut operating expenses, which grew nearly as quickly as total revenue. That still leaves Pepsi with operating margins superior to those of rivals Cadbury-Schweppes (NYSE:CSG), Kraft (NYSE:KFT), and Jones Soda (NASDAQ:JSDA). But it suggests that further margin compression could be coming down the pike -- almost certainly in Q4, and perhaps for some time to come. Add this fear to what I continue to consider a rather rich valuation, even at today's multiple of 19. Shake well, and you can see why Pepsi is losing its fizz.

Which is not to say Pepsi isn't doing some exciting things. Read about how Pepsi's gone back to the USSR in:

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