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PepsiCo Expands Its Beverage Portfolio with Acquisition of KeVita

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Price movement

PepsiCo (PEP) has a market cap of $148.0 billion. It rose 0.62% to close at $102.89 per share on November 22, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 1.0%, -4.1%, and 5.2%, respectively, on the same day.

PEP is trading 2.0% below its 20-day moving average, 2.9% below its 50-day moving average, and 0.74% below its 200-day moving average.

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Related ETF and peers

The SPDR S&P 500 Growth ETF (SPYG) invests 0.91% of its holdings in PepsiCo. The YTD price movement of SPYG was 6.2% on November 22.

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

  • Coca-Cola (KO) — $179.3 billion
  • Mondelez International (MDLZ) — $67.1 billion
  • Dr Pepper Snapple (DPS) — $16.2 billion

Latest news on PepsiCo

In a press release on November 22, 2016, PepsiCo reported, “PepsiCo, Inc. (PEP) announced today that it has entered into a definitive agreement to acquire KeVita, a leading North American creator of fermented probiotic and kombucha beverages. The transaction will expand PepsiCo’s health and wellness offerings in the premium chilled beverage space.”

The press release added, “Upon closing which is subject to regulatory approval, KeVita will continue to operate independently with its production and bottling facilities located in Oxnard, California.”

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Performance of PepsiCo in fiscal 3Q16

PepsiCo (PEP) reported fiscal 3Q16 net revenue of $16.0 billion—a fall of 1.8% from its net revenue of $16.3 billion in fiscal 3Q15. PepsiCo’s revenue from its Frito-Lay North America and North America Beverages segments rose 3.4% and 2.9%, respectively. The company’s revenue from its Quaker Foods North America, Latin America, and Europe Sub-Saharan Africa segments fell 2.1%, 22.8%, and 1.9%, respectively, between fiscal 3Q15 and fiscal 3Q16.

Respectively, its net income and EPS (earnings per share) rose to $2.0 billion and $1.37 in fiscal 3Q16, compared with $533.0 million and $0.36 in fiscal 3Q15. It reported non-GAAP[1. generally accepted accounting principles] EPS of $1.40 in fiscal 3Q16—a rise of 3.7% compared to fiscal 3Q15. PEP’s cash and cash equivalents and inventories rose 12.8% and 14.7%, respectively, between fiscal 4Q15 and fiscal 3Q16.

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Quarterly dividend

PepsiCo has declared a quarterly dividend of just over $0.75 per share on its common stock. The dividend will be paid on January 6, 2017, to shareholders of record at the close of business on December 2, 2016.

Projections

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

  • core EPS of $4.78
  • organic revenue growth of ~4%, excluding the impact of a 53rd week and structural changes, but including 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, excluding certain items

In the final part of this series, let’s discuss Campbell Soup (CPB).

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