This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Pepsi Set to Redeem Faith in Soft Drink Business

Stocks in this article: PEP

NEW YORK ( TheStreet) -- PepsiCo (PEP), long criticized for neglecting its soft drinks and focusing excessively on building a healthy snacks portfolio, may finally see a turnaround in 2012, suggested by recent good news related to its soft drinks sales.


With initial sales of Pepsi Next better than expected and the company ready to spend an additional $600 million on advertisements in 2012, we could see a revival of its carbonated soft drink sales. PepsiCo competes with leading food and beverage companies around the world including Kraft Foods (KFT) Coca-Cola (KO) and Dr Pepper Snapple (DPS).

We maintain a price estimate of $69, which is about 5% above the current market price.

See our complete analysis of PepsiCo.

Hope Alive for Pepsi Brand

PepsiCo struck two major deals in April. First, it signed an agreement with DineEquity, which owns Applebee's as well as IHOP, allowing Pepsi to become the exclusive provider for the two restaurant chains. Currently, Pepsi is served in about 90% of Applebee's restaurants and half of IHOP's outlets.

Follow TheStreet on Twitter and become a fan on Facebook.

The second deal saw PepsiCo signing a multi-year agreement with Family Dollar stores, allowing Pepsi to be sold in its 7,100 stores across America. Both these deals give the beverage a much needed boost.

For Pepsi Next, the initial sales data suggests that the mid-calorie soft drink's performance has been better than anticipated, with the company claiming that the beverage is attracting new customers into the cola category. However, it is too early to comment on how the beverage will perform in the long run. Initial sales can be misleading as consumers often buy products on hype.

Earlier this year, Pepsi tied up with Nicki Minaj, which will see the singer as brand ambassador for the drink. The first commercial is scheduled for launch next week as part of Pepsi's global campaign "Live for Now." Although Pepsi has been consistently losing market share in the U.S. carbonated soft drink market, we estimate this year could be different, and we expect Pepsi to maintain its market share.

2012 Guidance Reaffirmed

During the recent earnings call for first-quarter results, PepsiCo reaffirmed its full-year guidance of earnings of $4.40 per share, which is a drop of 5% over 2011. The management cited increased marketing spend as well as restructuring costs related to laying off 8,700 workers as reasons for the drop in EPS.

Click here to find out how a company's products impact its stock price at Trefis

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs