* Q2 adj EPS $1.02 tops Wall Street view of $1.00
* Reaffirms full-year outlook
* No comment on pending offers for bottlers
* Shares off slightly (Adds analysts' comments, updates share movement)
By Ben Klayman
CHICAGO, July 22 (Reuters) - PepsiCo Inc (PEP.N) posted a bigger-than-expected quarterly profit, helped by growth in its international business, but revenue fell short of expectations as North American beverage sales declined, putting pressure on the company to close deals to buy its two big U.S. bottlers.
The maker of Pepsi-Cola and other sodas, Tropicana juices and Gatorade sports drinks reaffirmed its full-year outlook.
The company did not discuss its unsolicited takeover bids for Pepsi Bottling Group Inc PBG.N and PepsiAmericas Inc PAS.N, spurned as too low by both bottlers. CEO Indra Nooyi also declined to talk about the pending offers on a conference call with analysts.
"These results really underscore the need to address the weakness in the North American drinks unit," said Morningstar analyst Phil Gorham. "I think that will probably lead to an increased bid, sooner rather than later," for the bottling businesses.
PepsiCo second-quarter net income slipped 2.3 percent to $1.66 billion, or $1.06 a share, from $1.70 billion, or $1.05 a share, a year earlier. The number of shares outstanding was lower in the most recent quarter.
Excluding one-time items, PepsiCo earned $1.02 a share, 2 cents better than the average Wall Street forecast according to Reuters Estimates.
UBS analyst Kaumil Gajrawala in a research note cited better-than-expected profit margins in every division, as well as strong trends in the international and Frito-Lay businesses. He has a "buy" rating on the stock.
J.P. Morgan analyst John Faucher pointed to a lower-than-expected tax rate and expects Wall Street's 2009 profit estimates to rise due to an expected lower foreign exchange hit and presumed better underlying growth.
NORTH AMERICAN DRINKS LAG
PepsiCo's net revenue fell 3 percent from a year ago to $10.59 billion, below the $10.95 billion analysts had expected. Revenue rose 9 percent in the North American food business and 12 percent in its international business, but fell 7 percent in the North American drinks business.
The results come a day after rival Coca-Cola Co (KO.N) similarly reported a quarterly profit that topped estimates but lighter-than-anticipated revenue. [ID:nN21195776]
PepsiCo's overall revenue rose 5.5 percent on a constant currency basis and its sales by volume rose 1 percent.
The company said its outlook does not include the impact of the proposed deals for the bottlers and that it would not repurchase company stock until their resolution. The company said it did not buy back shares in the first two quarters.
Faucher, who has an "overweight" rating on the stock, said the decision to not repurchase shares will add a little pressure on PepsiCo to get the deals done.
Analysts expect PepsiCo to raise its bids for the bottlers, despite assurances from the company it would maintain a "disciplined approach" and signaled it could walk away from the offers. When asked by an analyst what the backup plan would be if the deals do not occur, Nooyi said she would not comment.
The company on Wednesday reaffirmed its full-year outlook, which calls for net revenue and core earnings per share to rise at a mid-to-high-single-digit percent rate on a constant currency basis. Its 2008 core earnings were $3.68 a share.
It said it now expects foreign exchange rates to hurt full-year core earnings on a constant currency basis by roughly 6 percent, compared with 8 percent in the second quarter. That new full-year expectation is down from the high single digits it previously forecast, Chief Financial Officer Richard Goodman said.
"We're being cautious," he said in a telephone interview, about the weak economy. "There are obviously some green shoots out there and that's good news, but consumers are also being very cautious in their spending."
Shares were off 25 cents at $56.15 in midday trading on the New York Stock Exchange. (Additional reporting by Brad Dorfman; Editing by Brian Moss and Matthew Lewis)