Earnings Preview: PepsiCo 2Q earnings

OVERVIEW: PepsiCo's North American division is expected to report soft demand for soft drinks, but analysts look to the company's international and Frito-Lay snacks businesses to continue to drive growth higher.

Purchase, N.Y.-based PepsiCo--owner of brands such as Mountain Dew, Aquafina, Lay's, Tropicana and Quaker Oats--announced at the end of the first quarter that it would raise prices, putting analysts on notice that volume growth could slow down.

PepsiCo has said it was hurt by higher prices for commodities such as cooking oil, oats, wheat, corn and energy.

BY THE NUMBERS: Analysts polled by Thomson Financial expect earnings per share of $1.02 on revenue of $10.52 billion, on average.

ANALYST TAKE: Morgan Stanley analyst Bill Pecoriello believes PepsiCo will increase concentrate prices it charges to bottlers, following last week's announcement by Coca-Cola's biggest bottler that it will raise the prices it charges retailers. He said other key issues are the company's cost outlook for commodities, navigating an inflationary environment in the U.S. and the strength of the international division to drive growth.

WHAT'S AHEAD: Pecoriello also told investors the company is expected to disclose details about productivity initiatives to offset inflation of input prices in 2009, but he is unsure whether these details will be offered on Wednesday.

STOCK PERFORMANCE: During the quarter, PepsiCo shares fell 12 percent to $63.59 on June 30. Over the past year, the share price fell 2 percent, from June 2007 to June 2008.