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PepsiCo Announced Plans for Diet Pepsi

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PepsiCo’s price movement

PepsiCo (PEP) has a market cap of $147.5 billion. Its stock rose by 0.15% to close at $102.13 per share on June 27, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -1.2%, 0.98%, and 3.7%, respectively, on the same day. PEP is trading 0.70% below its 20-day moving average, 0.39% below its 50-day moving average, and 3.5% above its 200-day moving average.

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Related ETF and peers

The SPDR S&P Dividend ETF (SDY) invests 1.2% of its holdings in PepsiCo. The ETF tracks a yield-weighted index of 50 dividend-paying companies from the S&P 1500 Composite Index that have increased their dividend for at least 20 consecutive years. The YTD price movement of SDY was 9.5% on June 27.

The market caps of PepsiCo’s competitors are as follows:

  • Coca-Cola (KO): $189.4 billion
  • Mondelez International (MDLZ): $64.2 billion
  • Dr Pepper Snapple Group (DPS): $17.8 billion

PepsiCo announced new plans

To boost sales, PepsiCo is planning to bring back aspartame, an artificial sweetener, in its Diet Pepsi. “Diet Pepsi Classic Sweetener Blend,” the new aspartame-sweetened drink, will come on the market in September.

Reuters stated, “PepsiCo will also rebrand ‘Pepsi Max’ as ‘Pepsi Zero Sugar’ to make it clear it is a diet drink. Pepsi Max competes with Coca-Cola Co.’s Coke Zero.”

PepsiCo’s performance in fiscal 1Q16

PepsiCo (PEP) reported fiscal 1Q16 net revenue of $11.9 billion, a fall of 2.9% compared to net revenues of $12.2 billion in fiscal 1Q15. The company’s cost of sales as a percentage of net revenues and operating profit fell by 3.6% and 9.9%, respectively, in fiscal 1Q16 compared to fiscal 1Q15.

Its net income and EPS (earnings per share) fell to $931.0 million and $0.64, respectively, in fiscal 1Q16, compared to $1.2 million and $0.81, respectively, in fiscal 1Q15.

PepsiCo’s cash and cash equivalents fell by 10.7%, and its inventories rose by 18.3% in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio and debt-to-equity ratio rose to 1.4x and 5.2x, respectively, in fiscal 1Q16, compared to 1.3x and 4.8x, respectively, in fiscal 4Q15.

In the next article in this series, we’ll discuss McCormick & Company’s new target price.

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