Sunday, May 06, 2012

Pepsico (PEP) 2012 Review | All American Investor

Pepsico Inc (PEO) is a global participant in the soft drink, snack food, ready to eat cereals and rice and pasta products. Its brand names include Pepsi, Mountain Dew, Gatorade, Tropicana, Sierra Mist, Aquafina, Lay’s, Doritos Tostitos, Cheetos, Ruffles, Captain Crunch, Quaker Oats.

The company has grown profits and dividends at a 11-12% pace over the last 10 years earning a 25-30% return on equity. PEP should continue to grow at an above average rate because:

(1) a strong new product pipeline which is being augmented by initiatives such as ‘Smart Spot’ which marks healthy choice products,

(2) rapidly expanding international sales. PEP is aggressively introducing its products into China, India, the Middle East, Africa and Latin America,

(3) improving productivity by increasing its merchandising effectiveness and lowering costs,

(4) acquisitions,

(5) stock buy back program.

(1) foreign exposure subjects it to currency fluctuations,

(2) rising raw material costs,

(3) PEP is in a highly competitive industry.

PEP is rated A++ by Value Line, has a 48% debt to equity ratio and its stock yields 3.4%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
PEP 3.4% 7% 45% 10
IND 2.2 7 44 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
PEP 49% 27% 1 10% A++
IND 53 19 NA 14 NA

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