A financial report issued by PepsiCo, Inc. (PEP) included record results for the company’s snacks and beverages division worldwide. Analysts are bullish on stocks and enthusiastic about stores that offer bullishness in the future, based on healthy fundamentals and a long-term outlook that favors earnings. During the COVID epidemic, the diversification of the company’s product portfolio resulted in increased demand for packaged products. During the fourth quarter, PepsiCo had about $5.7 billion in cash and short-term investments, $3.8 billion less than the $38 billion in long-term debt it had in late 2020. Management predicts that a post-pandemic recovery will have a tailwind for the company as people abandon the domestic channel searching for mobility and displacement.
PepsiCo (PEP) has increased its dividend for 49 consecutive years. It is on its way to being a “King of the Dividend” with a 50-year track record by 2022. The best way to understand PEP’s future growth potential is to realize that it has different opportunities for growth in the United States and around the world. Based on comments made by PepsiCo’s management, the corporation appears to be gaining market share from longtime opponent Coca-Cola Co. (KO). With the closing of public places, Coca-Cola (KO) lost sales outside the home, as people could not buy soda in those places. Analysts said that PepsiCo is a better business than others.
The pandemic was a significant issue for the KO due to the impact it had on the company. As a result, a “buy” rating is assigned to PEP shares. For next year, the company projects excellent operating and financial conditions, and it is expected that this growth trend may continue for the PEP.
Even when the economy begins to show signs of growth, it is in your interest to own PepsiCo (PEP). For the beverage and snack company, second-quarter financial results were much better than expected. Despite continuing to rise in the valuation, analysts remain firm in their belief that it is still an excellent investment. Valuations appear to be decently priced, as the long-term growth rate the company should enjoy in EPS should be over 8%. PEP’s share price was downgraded by Credit Suisse, which claims that the P/E is worse than the average P/E of 22 times over the past five years. S&P 500, with the correlation factor being fair 0.4 times the highest possible value of 1.0.
PepsiCo: Keeping an eye on the growing international
The last essay examined Coca-Cola (KO) and PepsiCo (PEP) in a strategic context, including finance and business areas. As part of exploring PepsiCo’s business strategy, long-term growth potential, and key competitive advantages, we will delve deeper into PepsiCo’s recent acquisitions. As the company’s broad business areas across all food and beverage sales worldwide have protected it from the effects of COVID-19, the company can better resist the downside risk. According to KO, the company created a “very consumer-centric” business strategy using his methodology. On the other hand, since PEP is not convinced that the relevant markets have sufficient scale or leadership, they don’t want to own their bottling system there.
They were able to have a close connection with consumers by approaching them in this way and having a tiny fraction of the available bottling systems – single-digit percentage, little. To remain in the US market, Pepsi must follow this strategy. PEP will continuously improve its manufacturing efficiency due to its scale and will strive to keep its prices competitive. Analysts believe PEP’s acquisition of Rockstar would significantly impact the energy drink market in the near term. The global energy drink market is projected to increase significantly, from $52.87 billion in 2019 to $86 billion in 2026, with a CAGR of 7.2 percent.
Red Bull and MNST are the leaders in the American market, which is frustrating for investors who want more attractive names. However, analysts believe Rockstar is better positioned than they are. Leadership in the snack area is boosting PEP’s position in the international market. Our net revenue abroad comes from snacks 65% of the time, while beverages are 35% remaining. Global markets are the future growth engine of our industry. In 2019, snack foods represented 37% of the French fries industry, and growth will increase to a CAGR of 10.9%.
Leading the China market would be PepsiCo’s top priority. The retail snack market in China will be worth approximately $119.6 billion (or about 774.9 billion yuan) in 2020. Be & Cheery of China is a significant acquisition that will help PEP improve its position in the Marketplace. It is known that PEP has an extensive portfolio of snacks, notably savory snacks. Still, to adequately serve the market, a significant amount of localization must be implemented. Therefore, it is pronounced that PEP’s acquisition of Be & Cheery was a sage decision.
Analysts surmise that for cautious investors, the current valuation is unlikely to be attractive. Given the exceptional stability and high-quality earnings and cash flow the company produces, we feel the stock is still beautiful with a current dividend yield of 2.88%. The PEP stock appears to be overbought and is currently testing resistance at the same time. The market exhibits a long-term bullish bias about the PEP business model, as evidenced by the existence of an established long-term uptrend. One of the most affordable long-term total return stock opportunities (dividends + long-term capital appreciation) for investors
PepsiCo: Future stock performance and Coke clash
PepsiCo has experienced a significant increase in the offering price, although its finances have got a little tight. Over the long term, PepsiCo’s long-term debt increased by 24%, while its cash on hand declined by 52%. As a result, to increase revenues, the company may have to use organic growth to an even greater extent in the future. Analysts now forecast sales growth of 7% for the year, although growth is likely to be slower in the long term. Nevertheless, PepsiCo is one of the best-performing stocks when it comes to increasing dividends.
About two-thirds of the cash flow is paid out as dividends. It appears that analysts are predicting a slower growth rate for PepsiCo as we go forward. The base rate of 6% considers the management team’s ambitions, which aim for “high single-digit” growth, and analysts’ forecasts that show slower growth in the future. PepsiCo’s current stock price is $150 a share, while the price in 2025 is $210. To deliver double-digit returns in the short term, the company needs to “make things right” in all areas.
For investors to receive a return on their investment, PepsiCo will need to increase its dividend by 10% over the next five years. The share value could drop to $10 in that time frame if the company doesn’t live up to expectations.
The average customer views Coca-Cola (KO) and PepsiCo (PEP) as a beverage companies. This year, Coca-Cola saw sales drop 11%, while Pepsi had a revenue increase of nearly 5%. Many theater and restaurant franchises, amusement parks, and sports stadiums have agreements with Coca-Cola. With restaurants, cinemas, and stadiums, Pepsi manages large profit margins. A critical difference between Pepsi and Coca-Cola is that while Pepsi is headquartered in New York City, Coca-Cola is headquartered in Atlanta, Georgia.
To generate $1 billion in annual sales, Coke has twenty brands, five of which are in the top ten. Although Pepsi earns twice as much revenue as Coke, KO has 80,300 employees compared to 291,000 at the end of fiscal year 20. To direct more of its profits to foreign subsidiaries, Coca-Cola turned profits primarily in Ireland and Brazil. With a 3.5% increase in its underlying effective tax rate, the liability (i.e., the tax liability) would total $12 billion in annual taxes over the next few years. As a result, KO has a higher yield, but Pepsi has a lower payout rate and a more robust five-year dividend growth rate.
In the medium term, Pepsi will significantly surpass Coca-Cola. Pepsi shares have appreciated 41% over the past five years, while the KO has risen about 20%. In the opinion of analysts, none of the companies has a good assessment. As such, the shares are believed to be SALES. Analysts would consider investing in PEP if the share price drops 15% due to investor risk.
PEP PepsiCo, Inc. – A little history
PEP, a beverage company that manufactures and sells products like Pepsi-Cola. The company is a holding company that operates in three business segments: PepsiCo Americas Foods, PepsiCo Americas Beverages, and Quaker Foods. The stock has been struggling for a while now, after a few good years. It examines the challenges many beverage inventories face, such as The Coca-Cola Company (KO), due to the declining consumption of soft drinks in developed markets.
In 2009, PEP acquired Frito-Lay from PepsiCo. Frito-Lay manufactures Fritos and Doritos in the United States and Cheetos in Latin America. These are among the most successful snacks in North America and the Asia Pacific. In the same year, PEP acquired Tropicana from The Quaker Oats Company. Tropicana was the third-largest juice company in the world. Its products include orange juice, apple juice, grape juice, and fruit juices and snacks. The acquisition added to PEP’s healthy beverage package, especially in North America, a large juice consumer market. Finally, in 2012, PEP purchased KRAFT Foods, Inc., a snack and beverage manufacturer. The acquisition of KRAFT adds to PEP’s product portfolio.
PEP, like other beverage companies, is affected by changing consumer preferences and changing demographics. For example, in developed countries like
Soft drinks have lost market share to non-carbonated beverages such as bottled water and juices in the US and the UK. In addition, the average age of the US population is getting older. As the population of the United States ages, more people drink less. Therefore, PEP revenues may decline as demand for its products declines.
However, despite this potential downwind, PEP is still one of the best beverages stocks to buy because it has high barriers to entry. Its product portfolio is diversified and profitable. In addition, the company’s brand is a strong point. In a typical year, total soft drink consumption is 100 gallons in North America and about the same volume in developing economies. However, there has been a decline in total consumption in recent years due to changes in consumer preferences.
The stock has been declining for many months as it will likely face serious competition from the Coca-Cola Company (KO). However, as far as investors are concerned, the risk is that PepsiCo is a very conservatively managed company with a good track record. Therefore, the downside risk is that investors are likely to see a fall in the stock price that may not be justified.