As of January 28, 2016, PepsiCo (PEP) was trading at a stock price of $97.45. The company’s stock price has declined by 1.3% on a year-to-date basis. The Consumer Staples Select Sector SPDR ETF(XLP), which has 20.7% exposure to beverage companies, has declined by 0.2% since the start of 2016. PepsiCo constitutes 4.5% of the portfolio holdings of XLP.
The broader market, represented by the S&P 500 Index, has declined by 5.9% on a year-to-date basis due to falling oil prices and the impact of a slowdown in China.
Stock movement in 2015
In 2015, PepsiCo’s stock price appreciated by 5.8%, outperforming its closest beverage rival Coca-Cola (KO), which was up 1.9%. The S&P 500 Index declined by 0.7% in 2015.
However, PepsiCo’s stock underperformed Dr Pepper Snapple (DPS) and Monster Beverage (MNST) in 2015. The stock prices of Dr Pepper Snapple and Monster Beverage appreciated by 30.2% and 37.7%, respectively, in 2015.
As discussed in Parts 1 and 5 of this series, PepsiCo’s results have been severely impacted by currency headwinds. Also, PepsiCo’s beverage business is facing pressure due to the declining volumes of its carbonated beverages. PepsiCo’s Frito-Lay business continues to be promising. The division reported 1% growth in its net revenue and 6% growth in its operating profit in 3Q15.
As of January 28, about 59% (or 17) analysts out of 29 analysts, have a “buy” recommendation for PepsiCo and 12 analysts have a “hold” recommendation. None of the analysts have a sell recommendation. An attractive dividend policy, aggressive productivity measures, and a diversified snack and beverage business model are factors that work in PepsiCo’s favor.
As of January 28, the consensus 12-month price target for PepsiCo is $105.61, which reflects a potential upside of 8.4% in the company’s stock price compared to the current stock price of $97.45.