Pepsi: Charting the Key Drivers

Pepsi, the flagship carbonated soft-drink brand for PepsiCo(PEP), constitutes only 7% of the $67 Trefis price estimate for the stock. PepsiCo competes with Coca-Cola(KO) and Dr Pepper Snapple (DPS) in the carbonated soft-drink market. Trefis' price estimate for the stock is about 3% above the current market price of $65.

Trefis members have created forecasts for two key drivers of PepsiCo's stock during the last week: (1) Pepsi's Gross Profit Margin and (2) Pepsi's U.S. Revenue per Case. The member forecasts suggest that Pepsi's U.S. Revenue per Case will trend higher than the Trefis forecast.

While we expect Pepsi Gross Profit Margin to remain flat over the Trefis forecast period, Trefis members expect the driver to trend below the Trefis forecast till 2012, and then trend above until 2016. These projections suggest limited upside to the PepsiCo's stock price.

PepsiCo's stock is not significantly impacted by (1) Pepsi Gross Profit Margin and (2) Pepsi's US Revenue per Case . Below are charts showing recent estimates created by Trefis members for the two drivers in detail.

1. Pepsi Gross Profit Margin

The average of forecasts for Pepsi Gross Profit Margin created by Trefis members indicated a projected increase from 50% in 2010 to 55.8% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of margins remaining around 53% over the Trefis forecast period. The member estimates imply little upside to the Trefis price estimate for PepsiCo's stock. In the past, Pepsi Gross Profit Margin has decreased from 56.5% in 2005 to 53.5% in 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of PepsiCo's stock to Pepsi Gross Profit Margin.

Our complete analysis for Pepsi Gross Profit Margin is here .

2. Pepsi's US Revenue per Case

The average of forecasts for Pepsi's US Revenue per Case created by Trefis members indicated a projected increase from $2.60 in 2010 to $3 by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from $2.40 in 2010 to $2.80 by the end of the Trefis forecast period. The member estimates imply very little upside to the Trefis price estimate for PepsiCo's stock. In the past, Pepsi's US Revenue per Case averaged $1.40 from 2005 to 2009.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of PepsiCo's stock to Pepsi's US Revenue per Case. Our complete analysis for PepsiCo's stock is here.

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