Pepsi's profits lose the old zip 24 cents a share far below estimates

February 05, 1997|By BLOOMBERG BUSINESS NEWS

PURCHASE, N.Y. -- PepsiCo Inc. said its fourth-quarter earnings before charges fell 38 percent, far more than expected, as it spent heavily to recover from missteps that hurt soft-drink sales overseas.

The maker of Pepsi-Cola and Lay's potato chips said profit from operations fell to $351 million, or 24 cents a share. That's well short of the 33-cent average estimate of 20 analysts polled by IBES International Inc.

PepsiCo said last month that it would shed its restaurants to focus on soft-drink and snacks. Surprisingly steep losses from overseas beverages shows that the company has its work cut out to catch up with rival Coca-Cola Co., analysts said.

"They've got such a significant hole to climb out of that it's going to take them years," said Credit Suisse First Boston analyst Martin Romm.

Pepsi officials conceded as much, telling analysts that they didn't expect to return to 1994's profit level of $195 million from overseas beverages until 1998.

Revenue rose 3.6 percent to $9.53 billion from $9.21 billion. PepsiCo had profit from operations of $565 million, or 35 cents, in the corresponding quarter last year.

The loss in the international beverages unit -- $404 million -- was compounded by troubles at PepsiCo's restaurants, especially Taco Bell and Pizza Hut. The unit had an operating loss of $144 million, compared with a profit of $261 million a year earlier.

The No. 2 soft-drink maker spent an extra $80 million on its drinks overseas, mostly in Latin America to recover market share lost to Coke.

International beverage sales fell 9 percent.

Shares of Purchase, N.Y.-based PepsiCo fell $1.25 to $32.875 yesterday in trading of nearly 11 million shares.

Ryder System Inc.

Ryder System Inc.'s fourth-quarter profit fell 48 percent, as the company was hurt by weak demand for rental trucks.

The logistics and transportation company said profit from operations fell to $29.2 million, or 36 cents a share, from net income of $56.4 million, or 71 cents, a year earlier.

The numbers matched analysts' expectations.

Restructuring charges in the latest quarter of $143.6 million, or $1.75 a share, and the retirement of high-interest debt for a loss of $10 million, or 12 cents, resulted in a bottom- line loss of $109.4 million, or $1.34 a share.

Revenue rose 0.8 percent to $1.36 billion from $1.35 billion.

Sprint Corp.

Sprint Corp.'s fourth-quarter profit rose 4.6 percent as the company posted the strongest annual volume growth among the top three long-distance phone companies in seven years.

Sprint also warned investors that earnings per share would fall in 1997 as it spends billions of dollars to expand its local, wireless and international operations.

The nation's No. 3 long-distance company said profit from operations rose to $281.8 million, or 65 cents a share, from profit from continuing operations of $269.3 million, or 77 cents, a year earlier.

Sales rose 8.5 percent to $3.62 billion from $3.34 billion.

In the fourth quarter, a charge of $36 million, or 8 cents a share, for litigation, resulted in net income of $245.3 million, or 57 cents.

Dow Corning Corp.

Dow Corning Corp. said fourth-quarter profit rose 55 percent, bolstered by the sale of a unit and lower interest expense as it operates under Chapter 11 bankruptcy protection.

The company, struggling to settle tens of thousands of lawsuits over silicone breast implants, said profit rose to $61.4 million in the quarter ended Dec. 31 from $39.6 million a year earlier, in part because of a pretax gain of $9.5 million on the sale of its Bisco Products unit, and lower interest expense as the company delays paying creditors until it emerges from Chapter 11.

Revenue increased 4 percent to $639.6 million from $615 million, led by strong demand in North America and South America.

For the year, Dow Corning reported profit of $221.7 million, compared with profit from operations of $190.6 million in 1995. A special charge related to the implant litigation resulted in a loss of $30.6 million in 1995.

Revenue increased 1.6 percent to $2.53 billion from $2.49 billion in 1995.

Pub Date: 2/05/97

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