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Category: Stock Market and PepsiCo (PEP)
Date: 13 July 2020 Stock Price of PepsiCo: $134.36 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Pepsico, the owner of soft drink brand, Pepsi and Lays Chips amongst others and long time rival of the Coca-Cola company (KO). The group saw decent revenue growth of 7.7% compared to the same quarter of the prior year.
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Our sympathies go out to all affected by COVID-19 and we thank all those working to keep people safe through this crisis. I also want to personally thank every one of our associates for their tireless efforts to serve customers, consumers and communities with much needed food and beverages during these uncertain times "
About PepsiCo
In 1965, Donald Kendall, the CEO of Pepsi-Cola, and Herman Lay, the CEO of Frito-Lay, recognized what they called “a marriage made in heaven,” a single company delivering perfectly-salty snacks served alongside the best cola on earth. Their vision led to what quickly became one of the world's leading food and beverage companies: PepsiCo.
For more than 50 years, as tastes, trends and lifestyles have changed, PepsiCo has evolved with them. Our willingness to adapt and grow has transformed our snack and soda company into a collection of global brands including Pepsi and Quaker, Gatorade and Tropicana, Frito-Lay and beyond. Today, PepsiCo is one of the world’s most-respected companies with products sold in more than 200 countries and territories and 22 brands that generate more than $1 billion each in estimated annual retail sales.
PepsiCo is also celebrated for its commitment to doing business the right way, integrating Purpose into our business strategy. In 2019, we adopted a new vision: to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose. Winning with Purpose is the next chapter in our purpose agenda and conveys our belief that sustainability can be an even greater contributor to our success in the marketplace.
Our company is made up of six divisions: PepsiCo Beverages North America; Frito-Lay North America; Quaker Foods North America; Latin America; Europe Sub-Saharan Africa; and Asia, Middle East and North Africa. Each of these divisions has its own unique history and way of doing business.
The roots of PepsiCo Beverages North America (PBNA) go back to 1898, when Caleb Bradham, an entrepreneur from New Bern, North Carolina created Pepsi-Cola and began offering it to his pharmacy customers.
For more than 50 years, as tastes, trends and lifestyles have changed, PepsiCo has evolved with them. Our willingness to adapt and grow has transformed our snack and soda company into a collection of global brands including Pepsi and Quaker, Gatorade and Tropicana, Frito-Lay and beyond. Today, PepsiCo is one of the world’s most-respected companies with products sold in more than 200 countries and territories and 22 brands that generate more than $1 billion each in estimated annual retail sales.
PepsiCo is also celebrated for its commitment to doing business the right way, integrating Purpose into our business strategy. In 2019, we adopted a new vision: to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose. Winning with Purpose is the next chapter in our purpose agenda and conveys our belief that sustainability can be an even greater contributor to our success in the marketplace.
Our company is made up of six divisions: PepsiCo Beverages North America; Frito-Lay North America; Quaker Foods North America; Latin America; Europe Sub-Saharan Africa; and Asia, Middle East and North Africa. Each of these divisions has its own unique history and way of doing business.
- PepsiCo Beverages North America (PBNA)
- Frito-Lay North America (FLNA)
- Quaker Foods North America (QFNA)
- Latin America
- Europe and Sub-Saharan Africa (ESSA)
- Asia, Middle East, North Africa (AMENA)
The roots of PepsiCo Beverages North America (PBNA) go back to 1898, when Caleb Bradham, an entrepreneur from New Bern, North Carolina created Pepsi-Cola and began offering it to his pharmacy customers.
Overview of PepsiCo' 1st quarter 2020 earnings report
- Net sales: $13.881 billion (up from $12.884 billion for the same quarter of the previous year)
- Net sales increased by 7.7% over the last 12 months
- Cost of sales: $6.127 billion (up from $5.688 billion for the same quarter of the previous year)
- Cost of sales increased by 7.7% over the last 12 months
- Net income: $1.338 billion (down from $1.413 billion profit for the same quarter of the previous year)
- Diluted earnings per share: $0.96 (down from $1 per share for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 1.396 billion (down from 1.413 billion for the same quarter of the previous year)
- Cash and cash equivalents: $11.089 billion
- Cash and cash equivalents per share: $7.94
- Cash and cash equivalents makes up 5.9% of PepsiCo market capital
- Cash and cash equivalents makes up 13% of PepsiCo's total assets
- Accounts receivable: $8.477 billion
- Accounts receivable makes up 9.9% of PepsiCo's total assets
- Inventories: $3.6 billion
- Inventories makes up 4.2% of PepsiCo's total assets
- Goodwill: $15.465 billion
- Goodwill makes up 18.2% of PepsiCo's total assets. We are always nervous about goodwill making up such a large chunk of a company's assets. Basically goodwill is the estimated value of the name and reputation of the brands they hold. So if they were to sell Lays for example the group will attach a value of goodwill to Lays and tell the buyer this is how much goodwill is in the brand name. Such valuations are usually very subjective and its easy to manipulate or overinflate if you want to overstate the value of your company's assets.
- Goodwill amounts to $11.1 a PepsiCo stock
- Stockholders equity of PepsiCo's: $14.224 billion
- Stockholders equity per share for PepsiCo : $10.12
- So PepsiCo is trading at 13.2 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7
- Cash used by operations :$749 million
- Cash used by operations per share: $0.54
PepsiCo' management commentary on their 1st quarter 2020 earnings report
PURCHASE, N.Y. - April 28, 2020 - PepsiCo, Inc. (NASDAQ: PEP) today reported results for the first quarter 2020 and provided a 2020 business update. “Our sympathies go out to all affected by COVID-19 and we thank all those working to keep people safe through this crisis. I also want to personally thank every one of our associates for their tireless efforts to serve customers, consumers and communities with much needed food and beverages during these uncertain times. And to support our communities, PepsiCo launched an initiative to contribute more than $50 million focused on serving nutritious meals to people impacted by COVID-19 and providing vital support such as protective gear for healthcare workers, as well as testing and screening services. From community relief efforts to making, moving, and selling our products, PepsiCo employees around the world overcame immense challenges and disruptions. Our first quarter results reflect these efforts and the agility of our business which delivered high single-digit net revenue growth,” said PepsiCo Chairman and CEO, Ramon Laguarta.
This gives us confidence that the investments behind our Faster, Stronger and Better framework are working - as we invest in our brands, supply chain and go-to-market systems, manufacturing capacity, capabilities and culture, and our society by integrating purpose into everything we do. I am also pleased to announce that we closed our highly strategic acquisition of Rockstar Energy Beverages and have entered into a national agreement to be the exclusive distributor of Bang Energy drinks in the United States.
Together, these brands coupled with Mountain Dew, position PepsiCo to better participate and capture its fair share within an attractive and highly profitable category. Despite a strong first quarter, there is still a great deal of uncertainty that exists in relation to COVID-19, including how geographies, retail channels and consumer behaviors will evolve over time. Due to this uncertainty, the Company's previous financial outlook regarding fiscal year 2020 is no longer applicable. However, with a strong balance sheet, highly cash generative business and ample liquidity, we believe we have adequate flexibility to meet the needs of our business and return cash to shareholders. With a strong portfolio of brands in attractive categories, an agile supply chain and flexible go-tomarket systems, we are successfully managing through the complexities of today and building competitive advantages to emerge an even stronger company in the future.”
Together, these brands coupled with Mountain Dew, position PepsiCo to better participate and capture its fair share within an attractive and highly profitable category. Despite a strong first quarter, there is still a great deal of uncertainty that exists in relation to COVID-19, including how geographies, retail channels and consumer behaviors will evolve over time. Due to this uncertainty, the Company's previous financial outlook regarding fiscal year 2020 is no longer applicable. However, with a strong balance sheet, highly cash generative business and ample liquidity, we believe we have adequate flexibility to meet the needs of our business and return cash to shareholders. With a strong portfolio of brands in attractive categories, an agile supply chain and flexible go-tomarket systems, we are successfully managing through the complexities of today and building competitive advantages to emerge an even stronger company in the future.”
PepsiCo (NASDAQ: PEP) stock price history
The image below, obtained from Google, shows the stock price history of PepsiCo (NASDAQ: PEP) for the last 5 years. And it's been a good time for PepsiCo stockholders. 5 years ago the stock was trading at around $97.00 a stock and its currently trading at $134.46 a stock.
That's a decent return of 38.6% provided by PepsiCo over the last 5 years. The stock of PepsiCo is trading at a lot closer to its 52 week high of $147.20 than it is to its 52 week low of $101.42 which to us is a clear indication that the short term sentiment and momentum of PepsiCo stock is very positive.
That's a decent return of 38.6% provided by PepsiCo over the last 5 years. The stock of PepsiCo is trading at a lot closer to its 52 week high of $147.20 than it is to its 52 week low of $101.42 which to us is a clear indication that the short term sentiment and momentum of PepsiCo stock is very positive.
PepsiCo (PEP) stock vs Coca-Cola (KO) stock
The image below shows the stock price performance of PepsiCo (PEP) an Coca-Cola over the last 2 years. Both these firms are primarily active in the non -alcoholic beverages sector. While the stock price performance trends are fairly similar, in recent months there seems to have been a slight divergence in the stock performance of these two companies stock. Over the 2 year period the stock of PepsiCo returned 17.55% while the stock of Coca-Cola only returned 0.5% over the same period of time
Recent coverage of PepsiCo
The extract below shows some of the latest coverage on PepsiCo as obtained from Barrons.com
PepsiCo will report second-quarter earnings before the bell on Monday, and investors are hoping the snack-and-beverage giant will see a continued benefit from at-home munching. Pepsi stock (ticker: PEP) is down just under 2% year to date, putting it just ahead of the broader market’s decline and the 5.1% loss seen by peers tracked by the Consumer Staples Select Sector SDPR ETF (XLP).
Pepsi has gotten a boost from the pandemic, as more people are passing the time during lockdown by snacking, pushing up sales for the salty-snack category where its Frito-Lay brands are a major player.
Read the full article here
PepsiCo will report second-quarter earnings before the bell on Monday, and investors are hoping the snack-and-beverage giant will see a continued benefit from at-home munching. Pepsi stock (ticker: PEP) is down just under 2% year to date, putting it just ahead of the broader market’s decline and the 5.1% loss seen by peers tracked by the Consumer Staples Select Sector SDPR ETF (XLP).
Pepsi has gotten a boost from the pandemic, as more people are passing the time during lockdown by snacking, pushing up sales for the salty-snack category where its Frito-Lay brands are a major player.
Read the full article here
PepsiCo (NASDAQ: PEP) latest stock valuation
So what is PepsiCo (NASDAQ: PEP) stock worth based on the release of their latest earnings report and fiscal guidance provide? Based on their earnings report and the guidance provided our valuation models provide a target (full value) price for PepsiCo of $147.50 a stock. We therefore believe that the stock is undervalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $47.50. So a good entry point into PepsiCo stock would be at $132.80 or below. Since its currently at or around this price we rate PepsiCo (PEP) stock as a buy
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $47.50. So a good entry point into PepsiCo stock would be at $132.80 or below. Since its currently at or around this price we rate PepsiCo (PEP) stock as a buy
Next earnings release of PepsiCo
It is expected that PepsiCo will release their 2nd quarter 2020 earnings report today, 13 July 2020