Equity analysts Legg Mason has cut its fourth quarter and full-year EPS for Pepsi Bottling Group due to concerns with the company's Mexico operation.

The quarter four EPS has been cut from US$0.27 to US$0.26, while full-year EPS is down from US$1.69 to US$1.59. The changes are driven by lower estimated operating income for the company's Mexico operation, informed in part by recent conversations between Legg Mason and retailers and participants in Mexico's soft drink market.

In a release detailing the EPS cut, Legg Mason gave details for the cut. "Our revision takes us to US$0.13 below consensus of US$1.72 for 2004 and is overdue, in our assessment, on two counts," the analysts said. "First, we believe this sort of result is in line with current buyside expectations. Second, we have not gone from expecting a temporary 2H 03 deterioration in region profit trends that reverses in 2004. Rather, we have shifted our focus to reasonable expectations of performance beyond 2003 a few days before management shares their own shift."

Legg Mason said: "The 12-month risk/reward remains weighted heavily to the upside, by our analysis, due partly to a valuation that effectively says "we don't believe the numbers...or substantially lower numbers"."