NEW YORK (TheStreet) -- PepsiCo (PEP - Get Report) CEO Indra Nooyi is holding to the idea that the company should remain as one unit of PepsiCo and Frito-Lay, while activist investor Nelson Peltz is pushing for the two entities to split. TheStreet's Jim Cramer calls Nooyi one of his 21 "Bankable CEOs" and believes she would go through with Peltz's idea if she felt it best for the company.
Cramer thinks PepsiCo and Frito-Lay under one roof is a solid plan and notes the company has generated some earnings power; however, Cramer is down on the soda business at the moment. He notes there are several ways to win here because when an activist gets involved, regardless of the CEO's feelings on said activist's opinion, the stock tends to climb.
Cramer calls Nooyi a "very good executive" whom he expects to increase the company's value over time. Therefore, he suggests PepsiCo as a terrific buy under $83 dollars a share.
- PEPSICO INC has improved earnings per share by 5.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PEPSICO INC increased its bottom line by earning $4.32 versus $3.92 in the prior year. This year, the market expects an improvement in earnings ($4.52 versus $4.32).
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Beverages industry and the overall market, PEPSICO INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PEPSICO INC is rather high; currently it is at 56.50%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.65% trails the industry average.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: PEP Ratings Report