Has Pepsi lost its fizz?
PepsiCo, Inc. (PEP) consists of widely know brands like Frito-Lay, Pepsi-Cola, Tropicana, Quaker Oats and Gatoraide. I can find all of their brands in my pantry and you probably can in your's too. PepsiCo brands are among the best known and most respected in the world and are available in countries and territories throughout the world. PepsiCo's success is the result of superior products, high standards of performance, distinctive competitive strategies and the high integrity of its people.
They have been acquiring back some of their largest bottlers and hope to see $400 million drop to the bottom line through integrated costs savings. That, plus a 10% growth rate in the Frito-Lay division makes for a nice future. They are not ignoring the tremendous growth opportunities in China and India and are jumping into those markets with both feet.
Wall Street brokerages think sales will grow 32.60% this year and 7.50% next year. Their earnings per share estimates are an increase of 12.10% this year, 11.30% next year and an annual EPS growth rate of 8.87% for at least the next 5 years. These projections are the reason they have 13 buy and 2 hold recommendations published for their brokers to push as a core holding.
Recent price momentum has been good with 11 new highs in the last 20 sessions for a 3.22% increase in price last month. Barchart's technical indicators have 13 out of 13 signalling a buy. The stock recently traded around 67.68 well above it's 50 day moving average of 65.70. The 14 day Relative Strength Index is presently 65.21% and rising.
The recent price increase plus the Wall Street recommendations may be the reason this stock has such a wide and positive investor following. On Motley Fool the CAPS members vote 3,929 to 127 that the stock will beat the market with the All Stars voting 1,192 to 18 for the same thing. Fool notes that articles about the stock are positive 21 to 1.
This stock has it all:
1 - World wide brand name recognition
2 - Wall Street recommendations based on projected increases in sales and earnings
3 - 100% Barchart technical buy signal -- can't get any better than that
4 - Very popular core holding with the general investing public
Jim Van Meerten is an advisor to Marketocracy Capital Management who uses his model portfolios not only to manage their mutual funds but also their clients Separately Managed Accounts. You can read his blogs about those model portfolios and investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.
Disclosure: Jim Van Meerten through Marketocracy Capital Management has an interest in the stocks mentioned in this blog.