Analysts forecast better revenue growth in U.S. beverage and applaud recent improvement in the quality of the company's accounting, specifically on Venezuela.
Additionally, "We see a continuation of the strong price/mix story in U.S. beverages that first appeared in 2014," the firm noted.
Given these positive factors, analysts are siding with the bulls for the time being.
PepsiCo shares closed Friday's trading session down 0.82% to $100.10.
Based in Purchase, NY, PepsiCo operates as a food and beverage company worldwide.
Separately, TheStreet Ratings team rates PEPSICO INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate PEPSICO INC (PEP) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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 58.09%. 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 3.26% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.0%. Since the same quarter one year prior, revenues slightly dropped by 5.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- PEPSICO INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PEPSICO INC reported lower earnings of $4.27 versus $4.32 in the prior year. This year, the market expects an improvement in earnings ($4.56 versus $4.27).
- After a year of stock price fluctuations, the net result is that PEP's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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