NEW YORK (AP) _ PepsiCo Inc. beat Wall Street's first-quarter earnings expectations on Tuesday but investors sent its stock sharply lower anyway.

By late afternoon, PepsiCo shares were down more than 9 percent. A temporary cutback in potato chip production due to a shortage of potatoes was cited as one possible factor undercutting PepsiCo stock. The prospect of a higher tax rate may be another.

The soft drink and snack foods conglomerate reported its net income fell 12 percent in the quarter from a year ago, when its profits included a healthy contribution from a restaurant division that it no longer owns.

But the earnings were 19 percent above results excluding the restaurants a year ago and exceeded what the analysts expected.

The Purchase, N.Y.-based conglomerate earned $377 million, or 24 cents per diluted share, in the quarter ended March 21 compared with $427 million, or 27 cents a share, a year earlier.

Analysts surveyed by First Call Corp. expected earnings of 23 cents a share. The latest results also topped the 20 cents a share PepsiCo earned last year when the restaurant operations are excluded.

But its stock tumbled. In late trading on the New York Stock Exchange, PepsiCo was down $3.93 3/4 a share at $39.12 1/2.

Revenue rose 3 percent to $4.35 billion from $4.21 billion in 1997.

The stock fell even as Margaret Moore, vice president for investor relations at PepsiCo, discussed the results with analysts in a midday conference call.

During that presentation, she disclosed the Frito-Lay snack food division had cut back production of its regular potato chips for two weeks in April because potatoes were in short supply due to a poor spring harvest.

Production is now back at full throttle but Moore said the rollback could reduce volume and profits in its industry-leading division this quarter.

She said the production cutback affected the less profitable Lay's and Ruffles brands and not the new and more profitable Wow! line of fat-free potato chips that are being introduced nationally.

The production cutback was timed for April so stores would be fully stocked again during the key Memorial Day weekend in late May, she said.

The first-quarter results contained few surprises, said Emanuel Goldman, who follows PepsiCo for PaineWebber and has been recommending the stock.

Profits from its beverage business rose 4 percent worldwide as improvement overseas overcame a flat performance in North America.

North American sales volume was up 2.5 percent, but marketing spending increased as did the investment in expanding distribution of soft drinks at the fountain, such as in convenience stores and restaurants.

Pepsi-Cola is the nation's second-biggest soft drink company but trails top-ranked Coca-Cola Co. by a wide margin in fountain sales.

The Frito-Lay business posted a 1 percent profit rise worldwide led by a gain in salty snack profits in North America.

Goldman suggested some people may be worried that PepsiCo is benefiting this year from a lower tax rate than can be expected in the future due to recent favorable settlements with the Internal Revenue Service.

But he said the combination of the potato chip cutback and the tax breaks don't seem to be enough to explain the stock price decline.

``I think it's an overreaction,'' he said.