Pepsico (PEP) 2013 Review

Pepsico Inc 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, Walker’s, Smith’s and Sabrita’s.  The company has grown profits and dividends at an 11-13% 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) aggressive marketing and brand building.

(5) acquisitions,

(6) stock buy back program.

Negatives:

(1) sluggish beverage growth in North America,

(2) rising raw material costs,

(3) economic uncertainty impacts consumer spending.

PEP is rated A++ by Value Line, has a 50% debt to equity ratio and its stock yields 3.1%.

  Statistical Summary

                 Stock      Dividend         Payout      # Increases  

                Yield      Growth Rate     Ratio        Since 2003

PEP           3.1%           5%               49              10

Ind Ave      2.3              8                  37             NA 

                Debt/                          EPS Down       Net        Value Line

                 Equity         ROE      Since 2003      Margin       Rating

PEP           50                28%            1                  10%         A++

Ind Ave      44                21              NA                13           NA

   

     Chart

            Note: PEP stock made great progress off its March 2009 low, quickly surpassing the November 2008 trading high (green line) but taking much longer to overcome the downtrend off its January 2008 high (red line).  Long term the stock is in an uptrend (straight blue lines).  Intermediate term, it is in an uptrend (purple lines).  The wiggly blue line is on balance volume.  The Dividend Growth and Aggressive Growth Portfolios own full positions in PEP.  The upper boundary of its Buy Value Range is $72; the lower boundary of its Sell Half Range is $90.

 

http://finance.yahoo.com/q?s=PEP

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