PepsiCo Inc Stock Buy Recommendation Reiterated (PEP)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- PepsiCo (NYSE: PEP) has been reiterated by TheStreet Ratings as a buy with a ratings score of A . The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • 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. When compared to other companies in the Beverages industry and the overall market, PEPSICO INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • PEPSICO INC's earnings per share declined by 19.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PEPSICO INC increased its bottom line by earning $4.02 versus $3.91 in the prior year. This year, the market expects an improvement in earnings ($4.06 versus $4.02).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

PepsiCo, Inc. engages in the manufacture and sale of snacks, carbonated and non-carbonated beverages, dairy products, and other foods worldwide. The company has a P/E ratio of 18.6, equal to the average food & beverage industry P/E ratio and above the S&P 500 P/E ratio of 17.7. PepsiCo has a market cap of $109.94 billion and is part of the consumer goods sector and food & beverage industry. Shares are up 6.7% year to date as of the close of trading on Friday.

You can view the full PepsiCo Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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