Pepsi Bottling Group (NYSE: PBG), a beverage entity that competes with Coca-Cola (NYSE: KO) and Coca-Cola Enterprises (NYSE: CCE), reported Q2 earnings on Wednesday. Adjusting for a gain related to tax issues, the company earned 78 cents per share.
According to Trey Thoelcke's earnings preview, Pepsi Bottling Group was only supposed to make about 73 cents per share. So, management managed to beat Wall Street's projections. Unfortunately, management made the same amount of per-share profit in the year-ago period, so there wasn't any growth on the bottom line.
Here are some more bad points. Net sales came in at $3.3 billion. Analysts were expecting closer to $3.5 billion. Total worldwide physical case volume declined 4% and net revenue per case declined 3% (excluding currency effects, it was up 5%). Maybe we'll give the latter a pass on a currency-excluded basis, but the physical case volume metric is one of the most important data points for a beverage company. Seeing that one in decline is always disheartening for shareholders.
I've never been a huge fan of owning a bottler. I own Coke myself. I enjoy being on the side of the company that markets the brand; the bottlers tried to be more capital intense. And as I wrote just recently, PepsiCo (NYSE: PEP) wants to buy Pepsi Bottling Group to have more control over distribution. Problem is, Pepsi Bottling Group believes it's worth more than the $29.50 per-share offer it received. As of Wednesday's close, shares of the bottler were priced at $33.53. An individual investor probably doesn't want to deal with this arbitrage situation.
Shares of Pepsi Bottling Group didn't really react to the earnings news yesterday. It was down slightly. Personally, I would pass on this company. There are better ideas out there.
Disclosure: I own Coke; positions can change without notice.
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