Now I'm not suggesting that Pepsi is "better" than Coke. I won't get into that sort of debate. But Pepsi has beaten estimates in nearly every meaningful category amid significant headwinds. And I have to question why is now the time for activist investors to want to mess with something that clearly isn't broken. Management knows what it's doing.
All told, making a bold push for Modelez seems ill-timed, if not completely misguided. Besides, I don't believe Mondelez is an exceptional bargain, given that shares are sitting near their 52-week highs. And let's assume that Pepsi does make this acquisition. There's now the risk that Pepsi's management will not be able to execute to a level that exceeds the company's current output.
So although there are reasons to deal for Mondelez, I believe the greater risk would be to take the sort of action that disrupts Pepsi's current momentum. And Mondelez hasn't exactly performed to a level that deserves the sort of premium it would command. Until there is more compelling evidence that drastic action needs to be taken, I will have to side with management to maintain Pepsi's current structure as a diversified food and beverage operation.
Pepsi stock presents tremendous value here at around $78 per share. To the extent that management can execute on its long-term plans to improve operating margins, I don't see how this stock will ever go flat. And with the company still in the midst of $3 billion stock buyback, $90 per share seems a reasonable assumption in the next 6 to 12 months.
At the time of publication, the author held no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.