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Quick Hits: Surging Dollar Leaves Bad Taste in Pepsi's Mouth


Brief scrutiny of today's headlines.

The recent surge in the dollar is likely to hurt PepsiCo's (PEP) fourth-quarter earnings.

At current rates, the nation's second-largest soft drink maker says the stronger dollar will cost the company about $0.04 to $0.05 per share. The company now expects to report 2008 earnings of $3.67 to $3.68 a share, down from prior estimates of $3.72 to $3.74.

PepsiCo plans to cut about 3,300 jobs worldwide as part of a plan to generate $1.2 billion in pre-tax savings over the next 3 years, including $350 million to $400 million in 2009. Most of the cuts will come from closing 6 plants. The company plans to use the savings to build its brands as well as efforts to expand market share in selected markets.

That looks like a smart move. Overall sales, including snacks, increased to $11.2 billion from $10.2 billion in the third quarter. But soft-drink sales, which make up about 25% of PepsiCo's annual sale, fell 3% in North America, apparently as consumers cut back to cover the higher cost of food and gasoline.Junk food is expendable as consumers reduce spending.

PepsiCo said third-quarter net income fell to $1.58 billion, or $0.99 per share, from $1.74 billion, or $1.06 a year earlier. The company missed analysts' estimates by 2 cents a share.

PepsiCo's shares have fallen about 19% this year prior to Tuesday's trading, compared with a 23% decline for Coca-Cola (KO).

PepsiCo's brands include Pepsi-Cola soft drinks, Frito-Lay snacks and Quaker foods.
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