Pepsi Bottling Group (PBG) issued Q4 results on Tuesday. On a reported basis, the company made 40 cents per share. Last year at this time, there was a loss of $1.28 per share. In addition to that good news, Earnings.com says that expectations hovered around 43 cents per share, a figure much less than the adjusted stat of 59 cents.
Unfortunately, the top line didn't budge, and total worldwide physical case volume for the full fiscal year was worse by 3%. The latter metric is key to a beverage business, and in some ways, ultimately more important than net income. And in terms of cash from operations, there wasn't much going on. For the twelve-month period, money generation was slightly down.
PepsiCo (PEP) shareholders are surely interested in the health of the bottling entity. Those who don't own the bottler along with the soda marketer (and I would have to assume that most investors aren't dual owners) will soon be owning both. Pepsi Bottling Group is set to merge with PepsiCo this year.
So, for that reason alone, there's really no compelling argument to purchase shares of the bottler, unless there's some thesis of arbitrage behind it. Instead, those interested in the Pepsi brand would most likely want to look at PepsiCo stock itself.
I myself own Coca-Cola (KO), so I won't be looking at the enemy. However, I do think PepsiCo is a decent core holding for the patient investor. Not only do you get exposure to the beverage industry via a major player, but you receive access to salty snacks via Frito-Lay.
Honestly, I wasn't too taken by Pepsi Bottling Group's Q4 results (the earnings beat was cool, but case-volume growth was not), and I'm not 100% keen on the merger. I would never want to see Coke combine forces with Coca-Cola Enterprises (CCE); I like the model of keeping the bottler and the seller of syrup separate. PepsiCo obviously has a different opinion. The transaction won't sink the latter, certainly, but we'll have to wait for future data to make a proper assessment of the deal's ultimate ramifications.
Disclosure: I own Coke; positions can change without notice.