Pepsi Investment Recommendation

Only available on StudyMode
  • Download(s) : 58
  • Published : May 26, 2012
Open Document
Text Preview
INVESTMENT RECOMMENDATION
PEPSICO INC

-------------------------------------------------
Investment Recommendation BUY
PEPCICO INC

Dec. 10, 2011

INVESTMENT THESIS:
* PepsiCo is increasing its investment in China, PepsiCo Americas Beverages and in Nutrition growth initiatives. This initiative will help the company to grow the annual earnings more than 10% on a longer term.

* PepsiCo is the world’s largest snack food company, controlling 40% of the US snacks market and around 30% of the non-US market.

* The company has an attractive dividend yield of around 3% and the company has been a long-term value creator for investors by share buybacks.

* PepsiCo announced that in 2011 it will distribute its sports drink Gatorade on its Direct Store Delivery(DSD) this decision demonstrates the company’s focus on long-term growth of its Brands.

Key Stock Statistics
52-Week Price Range| $58.75-67.00|
Market Capitalization| $105.68|
Shares Outstanding| 1.58|
Institutional Ownership| 67.60%|
Dividend Yield| 2.9%|
Price/Earnings (ttm)| 16.81|
Price/Book| 5.26|
Price/Sales| 1.85|
ROA (ttm)| 10.70%|
ROE (ttm) | 36.27%|
Projected 5-Year Growth| 10.25%|

EPS ($)
Year| 2007| 2008| 2009| 2010|
EPS| 3.48| 3.26| 3.80| 4.61|
All earnings represent earnings from operations and have been filtered from net nonrecurring gains.

Catalogue
Executive Summary ……………………………….4

Company Overview ……………………………….4

SWOT Analysis ……………………………….6

Financial Analysis …………………………………7

Economic Outlook ……………………………….13

Catalysts for Growth ………………………………..14

Investment Positives and Negatives……………….14

Conclusion ………………………………..15

References P13
List of Figures P14

Executive Summary
Our buy recommendation for PepsiCo is based on a long-term success story. We believe that to reap the long-term benefits, PepsiCo is taking advantage of a current weak environment to focus on long-term growth initiatives. We feel that with the strength of its Brand strong distribution and opportunities to grow internationally, PepsiCo is well positioned in the market. Current growth initiatives focus on international expansion (primarily in China); the development of new distribution technology and capacity; and investments in brand marketing and new product development, with an emphasis on healthier products and environment sustainability.

During the third-quarter call, PepsiCo announced increased investment in these initiatives ahead of the already planned $0.10 per share. Over the long-term, we believe that PepsiCo has significant growth opportunities from the integration its bottlers, international expansion, and its strong snack and beverage brands. We have a buy recommendation on the stock, based on our valuation using different valuation methods with a price target range of $75 to $80.

Company Overview:

PepsiCo Inc. is a leading producer of soft drinks and snacks foods, with products sold in over 200 countries. The company’s portfolio includes 19 brands that generate over $1 billion in annual sales. The company is organized in three business units, as follows: 1. PepsiCo Americas Foods (PAF), which includes Frito−Lay North America (FLNA), Quaker Foods North America (QFNA) and all of its Latin American food and snack businesses (LAF), including its Sabritas and Gamesa businesses in Mexico. 2. PepsiCo Americas Beverages (PAB), which includes PepsiCo Beverages North America and all of our Latin American beverage businesses. 3. PepsiCo International (PI), which includes all PepsiCo businesses in Europe and all PepsiCo businesses in Asia, Middle East and Africa (AMEA).

PepsiCo’s three business units are comprised of six reportable segments. Total revenue contribution from each segment is shown is chart-I for 2009:

Frito−Lay North America(FLNA): FLNA...
tracking img