Pepsi Will Leap Higher In 2013 From Emerging Markets
I remember the Pepsi (PEP) commercial in the early nineties featuring Gloria Estefan. At the age of around 15 the commercial really made me want to try a Pepsi. For the past 20 years Pepsi has evolved into a company which derives almost half of its revenue from processed foods or snacks and the rest from beverages. This evolution has had its ups and downs but mostly ups. According to Yahoo, as of April 1st, 2012, the stock has returned 258% for the past 20 years compared to 260% for its closest competitor Coca-Cola (KO), 240% for the unmanaged S&P 500 index and 78% for Kellogg (K), the maker of cereal and other processed foods.
While clearly the beverage business is more profitable than snacks (or Kellogg is poorly managed), Pepsi is investing in the snacks business. Pepsico management expects the company to receive 55% of its revenues from snacks in ten years compared to 48% today. In addition, on February 8, 2012 Pepsico announced a restructuring program which would reduce costs, increase marketing expenses and increase dividends to $2.15 per share. Is this the right time to invest in Pepsico for the next twenty years? Below are some insights which should help you decide.
Pepsico has 1.65 billion shares outstanding, a market capitalization of slightly over $100 billion, and an enterprise value of $125 billion which includes $4 billion of cash and $21 billion of long-term debt among other items. In 2011, the company had revenue of $66.5 billion and earned $4.03 per share for an enterprise value to sales ratio of nearly two and a trailing twelve months price to earnings ratio of 16.1. To continue reading, click here.