Zacks.com: Analyst Blog

A Hold recommendation has recently been issued to non-alcoholic beverages company Pepsi Bottling Group, Inc. (PBG) by Zacks senior consumer products analyst Steven Ralston, CFA.  Here's what his latest update had to say:

'The Pepsi Bottling Group continues to execute well in a difficult soft drink environment. The company has reported solid net revenue per case in the U.S., resulting in several positive EPS revisions. However, operating profit in Mexico continues to decline due to soft volume and higher costs. In addition, rising commodity costs are pressuring margins, though cost and productivity initiatives are more than offsetting cost pressures from higher raw material prices.

'Pepsi Bottling increased guidance for 2007 and announced guidance for 2008 and beyond. Earnings are now expected to be in the range of $2.17 to $2.20 per diluted share, up from the earlier estimated range of $2.15 to $2.18. Operating income is expected to grow in the range of 10% to 11%, including the three percentage point impact from the consolidation of the Russian joint venture.

'The company now also expects operating free cash flow to exceed $570 million compared to the company's previous guidance of $560 to $570 million. Beyond 2007, management expects to achieve top-line growth of approximately 6% over the next three years (2008 through 2010), while achieving operating profit growth of 5% to 7% and diluted earnings per share growth in the high single-digits.

'Management expects commodity cost pressures to continue and contribute to a 5% to 6% increase in company's cost of goods sold per case in 2008. Adjusted operating profit in 2008 is expected to increase 4% to 6%. Guidance for adjusted diluted earnings per share is in the $2.30 to $2.38 range. Since the stock's rally adequately discounts the company's positive developments, the rating on Pepsi Bottling Group is a Hold.'

Read the full analyst report on PBG.