BSAD 570 PepsiCo Inc Stock Presentation 5.3.11

8/2/2019 BSAD 570 PepsiCo Inc Stock Presentation 5.3.11

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PepsiCo Inc.BSAD 570 Managerial Finance Theory & Practice

Summer Kirch


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Outline

Companys history

SWOT analysis

Discussion of the recent financial crises Financial ratios and graphs.


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History

Founded in 1898 as The Pepsi Cola Company

by Bradham

Merged with Frito-Lay Inc. in 1965 to create

PepsiCo Inc.

Major product divisions include non-alcoholic

beverages and prepackaged goods

Sold restaurant division in 1997 (KFC, Pizza

Hut & Taco Bell)


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SWOT - Strengths

2nd highest market share in non-alcoholic

beverage industry

Strong brand recognition of most of itsproducts. (i.e. Pepsi, Lays, Mtn Dew)

Strong R&D division that constantly develops

new products Diversification

Distribution


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SWOT Weaknesses

Overdependence on Wal-Mart.

Overdependence on US Markets

Showed signs of low productivity

Companys image was damaged in 2008

Non uniform company name for some PepsiCo

products.

Brand Power below direct competitor Coke


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SWOT - Opportunities

Broaden its product base Purchase smaller brands

International expansion

Capitalize on the growing savory snack andbottled water market within the United States.

Enter into more agreements with restaurant

chains, movie theaters, entertainmentdestinations, and other companies to offer their

soft drinks and/or snacks.

Increase brand awareness


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SWOT - Threats

Industry is cut-throat & filled with major

players (Coca-Cola, Proctor & Gamble etc.) The decline in carbonated drink sales

Negative impact of government regulations

Independent labels gaining market share Regulatory changes to minimum wages for

factories


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Recommendations

Purchase independent labels in foreign

countries

Increase spending in advertising to increasebrand awareness

Capitalize on the growing savory snack and

bottled water market within the United States.


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Current Economic Crisis

On Thursday April 28, 2011 PepsiCo reported a

five percent increase in net revenues year over

year and reiterated its earnings growth targetto seven-eight percent for 2011

If inflation pressures persist PepsiCo will have

to look to some price increases to offset this.

Rising commodity costs could impact the

companys ability to pass on the costs to end

consumers which could be limited


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Return on Equity 5 Year Span

29

.86%

35.3

8% 4

2.4

7%

32.8

3%

36.7

1%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Return on Equity For the Last Five Years

25-Dec-10

26-Dec-09

27-Dec-08

29-Dec-07

30-Dec-06


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Beta Coefficient Method

P = D1/(Rs g)

P = $1.92/(.055-.0047)

P = $34.07 per Beta Coefficient Method This model suggests that PEPs stock is

overpriced and should eventually drop down

to $38.17. Currently sells for $69.89 per share.


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P/E Ratio x EPS Method

P/E Ratio x EPS = Stock price expected value

17.59 x $3.92 = $68.95 per share

This method suggests that the equilibrium priceis only $0.06 higher than the current selling price

for PEP.

This tends to be why some experts have mixedemotions about this stock.


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Conclusion

Good market share & branding

Opportunity to expand to new markets.

PepsiCo Inc. is a very stable and safe stock. Questions?

Documents

BSAD 570 PepsiCo Inc Stock Presentation 5.3.11