PepsiCo (Ticker Symbol: PEP) announced recently that it is releasing three new fruit-flavored colas: Pepsi Lime, Pepsi Mango, and Pepsi Berry, using real fruit juice in time for the summer. The company also shared recipes on its website for creating cocktails and mocktails using its new flavored sodas. Additionally, PepsiCo announced this week that they will be investing $4 billion in Mexico within the next 18 months. Over $100 million of that investment will go towards a new plant that should create 3,000 new jobs; the plant is expected to be fully operational by 2025.
PepsiCo continues to invest in its snack business. Last year, it acquired healthy snack maker Bare Foods, the maker of baked fruit and vegetable snacks. The company feels that a transition into offering healthier products is a major key for its long-term growth and success. Additionally, in the fourth quarter of last year, PepsiCo finalized its acquisition of SodaStream, which enables consumers to make carbonated drinks in the comfort of their homes.
PepsiCo reported positive first-quarter earnings on April 17th that were better than analysts’ expectations, led by strong international growth and a solid performance from its Frito-Lay snack business. The food and beverage giant reported an earnings beat of .97 cents per share vs. Wall Street analysts’ expectations of .92 cents per share. Revenue also beat consensus and was reported at $12.88 billion vs. the $12.70 billion that Wall Street was expecting. Its major snack business, Frito-Lay, reported a solid net income beat of $1.41 billion vs. analysts’ expectations of $1.34 billion. PepsiCo also revealed that this year’s Super Bowl sales were much stronger than previous years and that helped its strong quarterly performance.
PepsiCo’s stock price had a rough start to 2018, led by overall market volatility and a disappointing earnings call. The stock proceeded to trade lower over the next two quarters dropping just over 20% before finding price support just under the $100 price level. PepsiCo’s stock broke above its 2018 downtrend late in the second quarter of 2018 and shot up through its 50-Day Moving Average. The stock was stuck in a choppy trading range, finding support twice when the price dropped 4% below its 200-day Moving Average. PepsiCo’s stock had a great start to 2019 led by two positive earnings releases that drove the stock to an all-time high of $128.39 on April 30th of this year.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 14 analysts offering 12-month price targets, the average price target for PepsiCo’s stock is $126.77. According to that number, the stock is priced right in-line with Wall Street’s analysts’ average price targets and could be considered at value around current levels near $126.02.
PepsiCo has announced some big investments in Bare Foods, SodaStream, and now its plant operations in Mexico. The company has started to balance those investments by decreasing at least $1 billion in costs every year through 2023; unfortunately, for some workers, will include layoffs that can be replaced by automation. PepsiCo continues to reward shareholders for holding its stock and currently the stock is trading just 2.5% from its all-time high. Investors should look to General Mills earnings report on June 25th for more news within the sector.