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PepsiCo Launches Organic Gatorade

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Price movement

PepsiCo (PEP) rose by 1.1% to close at ~$107.9 per share during the fifth week of August 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 1.1%, 0.20%, and 10.3%, respectively, as of September 2.

PEP is now trading 0.46% above its 20-day moving average, 0.87% above its 50-day moving average, and 6.8% above its 200-day moving average.

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Related ETFs and peers

The SPDR S&P 500 Growth ETF (SPYG) invests 0.92% of its holdings in PepsiCo. The ETF tracks an index of primarily large-cap growth stocks. The index selects companies from the S&P 500 Index based on three growth factors. The YTD price movement of SPYG was 6.1% on September 2.

The Consumer Staples Select Sector SPDR Fund (XLP) invests 4.5% of its holdings in PepsiCo. The ETF tracks a market-cap-weighted index of consumer staples stocks drawn from the S&P 500.

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

  • The Coca-Cola Company (KO): $188.7 billion
  • Mondelez International (MDLZ): $68.4 billion
  • Dr Pepper Snapple Group (DPS): $17.5 billion

Latest news on PepsiCo

In a press release on August 30, 2016, TheStreet reported that “PepsiCo (PEP), owner of Gatorade, confirmed Tuesday it has launched G Organic—which is USDA certified—at select Kroger (KR) supermarkets. It will be available later this fall on Amazon (AMZN). The sports drink is made with just seven ingredients: water, organic cane sugar, citric acid, organic natural flavor, sea salt, sodium citrate and potassium chloride.” 

The report also stated that “flavor options include mixed berry, strawberry, and lemon.”

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PepsiCo’s performance in fiscal 2Q16

PepsiCo reported fiscal 2Q16 net revenues of $15.4 billion, which represents a fall of 3.1% from its net revenues of $15.9 billion in fiscal 2Q15. Revenue from Frito-Lay North America, Quaker Foods North America, and North America Beverages rose by 3.2%, 2.7%, and 0.63%, respectively.

Revenues from its Latin America, Europe Sub-Saharan Africa, and Asia, Middle East, and North Africa segments fell by 22.8%, 5.4%, and 1.5%, respectively, between fiscals 2Q15 and 2Q16. The company’s gross profit margin and operating profit rose by 2.0% and 2.2%, respectively.

Net income and EPS

In fiscal 2Q16, PepsiCo’s net income and EPS (earnings per share) rose to $2.01 billion and $1.38, respectively, as compared to $1.98 billion and $1.33 in fiscal 2Q15.

PEP’s cash and cash equivalents and inventories rose by 6.0% and 28.2%, respectively, between fiscals 4Q15 and 1Q16. In fiscal 2Q16, its current ratio and debt-to-equity ratio rose to 1.4x and 4.9x, respectively, as compared to 1.3x and 4.8x in fiscal 4Q15.

Quarterly dividend and projections

PepsiCo has declared a quarterly dividend of ~$0.75 per share on its common stock. The dividend will be paid on September 30, 2016, to shareholders of record at the close of business on September 2, 2016.

PepsiCo (PEP) made the following projections for fiscal 2016:

  • core EPS of $4.71
  • organic revenue growth of ~4%, which excludes the impact of a 53rd week and structural changes but includes the deconsolidation of its Venezuelan operations
  • productivity savings of ~$1 billion
  • more than $10 billion in cash flow from operating activities
  • free cash flow of more than $7 billion, which excludes certain items
  • net capital spending of ~$3 billion
  • a return of ~$7 billion to its shareholders through dividends of ~$4 billion and share repurchases of ~$3 billion

In the next part, we’ll take a look at Canon (CAJ).

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