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PepsiCo (PEP) Hits a New 52-Week High on Solid Prospects
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Shares of PepsiCo Inc. (PEP - Free Report) scaled a 52-week high of $111.23 on Mar 15. The stock pulled back to end the trading session at $111.11, gaining 1.6% on the day.
The $158.6-billion beverage giant has seen its shares rise roughly 9% in the last one year, outperforming the Zacks categorized Beverages-Soft Drinks industry’s 3.4% decline.
What’s Driving the Stock?
PepsiCo is one of the largest food and beverage businesses in North America and the second largest in the world. The company has the competitive advantage of selling both snacks and beverages, which are complementary food categories. The complementary portfolio results in cost leverage, capability sharing, cross-category promotions and other commercial benefits.
In order to revitalize cola sales, which are suffering due to high calorie content, the company is testing cola product variations using evolutionary natural sweeteners in various markets.
Keeping in mind the changing consumer preferences, product innovation plays a major role in the company’s success. The company regularly creates new flavors of existing products alongside maintaining a robust pipeline of new products. PepsiCo has generated $5 billion in annual sales from new products since 2013, as innovation continues to support top-line growth. In 2016, the company launched a number of new low and reduced-calorie drinks like new recipes of Mirinda and 7UP containing 30% less sugar, which has been rolled out in over 80 international markets.
Moreover, PepsiCo has broadened its beverage portfolio to include more non-carbonated beverages in order to decrease its dependence on colas. In fact, the company generates just 12% of its revenues from trademark PepsiCo and less than 25% from carbonated soft drinks or CSD, globally.
The company’s focus on driving both efficiency and effectiveness has resulted in approximately $1 billion of annual savings since 2012 and is expected to generate approximately $1 billion in 2017. Savings from these investments and technology and operational changes are being re-invested in the business to drive top-line growth.
In 2016, PepsiCo acquired a sparkling probiotic U.S. drinks company KeVita, thereby diversifying its soft drinks portfolio amid slowing soda sales. The addition of KeVita will expand PepsiCo’s health and wellness offerings in the premium chilled beverage space.
Meanwhile, PepsiCo has a positive earnings surprise track for the trailing four quarters, with an average beat of 6.22%. The stock also boasts a solid return on equity or ROE of 58.5%, a lot higher than the industry average of 9.9%.
Again, dividends are usually, but not always, an indication of solid financial health. The company’s current dividend yield is 2.75%, compared with 0.00% for the industry.
That said, consumer tastes are swiftly shifting from CSDs to non-carbonated beverages. Though PepsiCo has increased marketing investments and is driving package and product innovation to boost the carbonated beverage business, no meaningful improvement has been seen yet. The company’s CSD volumes declined 2% each in 2014 and 2015 and 1% in 2016.
Again, PepsiCo expects to continue facing macroeconomic headwinds such as weakening international currencies, economic slowdown in many emerging countries, political and social unrest in some regions; and increased government regulation.
Investors can consider Zacks Ranked #1 stock Coca-Cola HBC AG (CCHGY - Free Report) and Zacks Rank #2 (Buy) stocks Coca-Cola Amatil Limited and Embotelladora Andina S.A. (AKO.B - Free Report) from the Beverages-Soft Drinks industry.
Full-year 2017 earnings are expected to increase 10.8% for Coca-Cola Amatil and 15.7% for Coca-Cola HBC AG.
Full-year revenue is expected to increase 15.2% for Embotelladora.
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PepsiCo (PEP) Hits a New 52-Week High on Solid Prospects
Shares of PepsiCo Inc. (PEP - Free Report) scaled a 52-week high of $111.23 on Mar 15. The stock pulled back to end the trading session at $111.11, gaining 1.6% on the day.
The $158.6-billion beverage giant has seen its shares rise roughly 9% in the last one year, outperforming the Zacks categorized Beverages-Soft Drinks industry’s 3.4% decline.
What’s Driving the Stock?
PepsiCo is one of the largest food and beverage businesses in North America and the second largest in the world. The company has the competitive advantage of selling both snacks and beverages, which are complementary food categories. The complementary portfolio results in cost leverage, capability sharing, cross-category promotions and other commercial benefits.
In order to revitalize cola sales, which are suffering due to high calorie content, the company is testing cola product variations using evolutionary natural sweeteners in various markets.
Keeping in mind the changing consumer preferences, product innovation plays a major role in the company’s success. The company regularly creates new flavors of existing products alongside maintaining a robust pipeline of new products. PepsiCo has generated $5 billion in annual sales from new products since 2013, as innovation continues to support top-line growth. In 2016, the company launched a number of new low and reduced-calorie drinks like new recipes of Mirinda and 7UP containing 30% less sugar, which has been rolled out in over 80 international markets.
Moreover, PepsiCo has broadened its beverage portfolio to include more non-carbonated beverages in order to decrease its dependence on colas. In fact, the company generates just 12% of its revenues from trademark PepsiCo and less than 25% from carbonated soft drinks or CSD, globally.
The company’s focus on driving both efficiency and effectiveness has resulted in approximately $1 billion of annual savings since 2012 and is expected to generate approximately $1 billion in 2017. Savings from these investments and technology and operational changes are being re-invested in the business to drive top-line growth.
In 2016, PepsiCo acquired a sparkling probiotic U.S. drinks company KeVita, thereby diversifying its soft drinks portfolio amid slowing soda sales. The addition of KeVita will expand PepsiCo’s health and wellness offerings in the premium chilled beverage space.
Meanwhile, PepsiCo has a positive earnings surprise track for the trailing four quarters, with an average beat of 6.22%. The stock also boasts a solid return on equity or ROE of 58.5%, a lot higher than the industry average of 9.9%.
Again, dividends are usually, but not always, an indication of solid financial health. The company’s current dividend yield is 2.75%, compared with 0.00% for the industry.
That said, consumer tastes are swiftly shifting from CSDs to non-carbonated beverages. Though PepsiCo has increased marketing investments and is driving package and product innovation to boost the carbonated beverage business, no meaningful improvement has been seen yet. The company’s CSD volumes declined 2% each in 2014 and 2015 and 1% in 2016.
Again, PepsiCo expects to continue facing macroeconomic headwinds such as weakening international currencies, economic slowdown in many emerging countries, political and social unrest in some regions; and increased government regulation.
Zacks Rank & Key Picks
PepsiCo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors can consider Zacks Ranked #1 stock Coca-Cola HBC AG (CCHGY - Free Report) and Zacks Rank #2 (Buy) stocks Coca-Cola Amatil Limited and Embotelladora Andina S.A. (AKO.B - Free Report) from the Beverages-Soft Drinks industry.
Full-year 2017 earnings are expected to increase 10.8% for Coca-Cola Amatil and 15.7% for Coca-Cola HBC AG.
Full-year revenue is expected to increase 15.2% for Embotelladora.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>