Wednesday, July 08, 2009

Pepsi Bottling Tax Position Entices PepsiCo-Perhaps

Pepsi Bottling Group (PBG) announced results which can make an analyst crazy. Top-line growth was down. (It was almost like listening to the Post Office revenues down by 1% but still here.) But because of the tax man, bottom line growth was very impressive and you would at first glance be impressed. The problem with this tax return is that there is no explanation as to why and if it will continue. But it clearly is the most critical variable in this earnings release.

You may think you should bonus the tax guy’s but you are not sure why. Given that the biggest shareholder, who most certainly has the best insight, is make an unsolicited offer you have to wonder what PepsiCo (PEP) understands about the taxes and if their offer is fairly valued.