NEW YORK (TheStreet) -- Pepsico (PEP) was down 0.75% to $82.87 in trading Tuesday following the news of a sharp drop in sales of its Diet Pepsi brand.
Sales of Diet Pepsi dropped 6.9% from 2012 to 2013, according to a report published by Beverage-Digest on Monday.
The sales drop was nearly identical for Coca Cola's (KO) Diet Coke brand at 6.8% during the same period.
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U.S. sales volume of carbonated drinks fell 3% in 2013 compared to a 1.2% drop in 2012. Sales volume for carbonated drinks is at its lowest point in 19 years.
TheStreet Ratings team rates PEPSICO INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PEPSICO INC (PEP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, notable return on equity, expanding profit margins and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 3.9%. 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. 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.
- 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.
- You can view the full analysis from the report here: PEP Ratings Report