Pepsi Earnings Growth Meets Large Layoffs (PEP, KO)

PepsiCo, Inc. (NYSE: PEP) is trying to turn a wrong-way ship.  Whether this is the right path is going to be up for debate.  During a recovery, layoffs are not always viewed as well. 

The soft drink, beverage and snack maker’s net income for the fourth quarter of 2011 was up 4% to $1.42 billion.  This came to $0.89 EPS, but the pre-item report of non-GAAP came in it $1.15 EPS.  Thomson Reuters was expecting a consensus of $1.13 EPS.  The company’s sales were up by more than 10% to $20.16 billion and that was also slightly above the consensus estimate of $19.89 billion in sales.

Where the story gets interesting the layoffs: 8,700, or about 3% of the company’s work force.  The job cuts are part of a cost-cutting strategy aimed to save $1.5 billion over the next three-years.  It also comes on top of what is said to be a higher push in marketing and advertising.

Cost pressure and a move toward healthier drinks have been a challenge.  Pepsi closed at $66.74 and the 52-week range is $58.50 to $71.89.  Shares are indicated down about 1% ahead of the opening bell.   Investors are currently leaning more toward Coca-Cola Company (NYSE: KO).

JON C. OGG