Lackluster worldwide case volume took the fizz out of Pepsi Bottling Group's (NYSE:PBG) second-quarter profits. PepsiCo's (NYSE:PEP) largest bottler and distributor managed to raise domestic prices 2% during the quarter, but that wasn't enough to offset weak stateside volume.

For the quarter, Pepsi Bottling earned $131 million, 5.8% below the prior year's Q2 net of $139 million. Per share, earnings kept pace with last year's at $0.47, thanks to a 5.7% reduction in shares outstanding. Analysts had been expecting $0.46 per share.

Revenues, on the other hand, rose nearly 15% to $2.5 billion from $2.2 billion. The revenue growth combined with increased pricing power helped expand gross margins to 49% for the quarter, versus last year's 46%.

However, worldwide volumes were flat, including a 2% decline in U.S. volume and 3% growth in international volume, which squeezed net margins to 5.17% from 6.29% in the year-ago quarter.

On the balance sheet accounts receivable and inventory levels rose in line with sales, with the former rising 12.5% and the latter 13.6%. Cash and equivalents declined, however, to $193 million from $202 million in the prior year's Q2.

Looking ahead, Pepsi Bottling expects to earn $1.61-$1.67 per share in fiscal 2003, with the lower end being more likely. The company, which earned $1.46 a diluted share in 2002, anticipates free cash flow of $400 million for the year, above last year's $391 million.

That leaves Pepsi Bottling trading at a forward price-to-earnings ratio of around 13.66 and a forward price-to-free cash flow ratio of 15, on expected earnings growth of 10.3% and free cash flow growth of 2.3%. Investors looking for a bargain won't find it here -- particularly after today's five-plus percent move.