NEW YORK (TheStreet) -- Shares of PepsiCo, Inc. (PEP) are up 2.32% to $91.24 in pre-market trade after it was reported that one of the U.S.'s largest pension funds has asked the food and beverage company to give activist investor Nelson Peltz a seat on the board, after becoming disillusioned with the soft drinks maker's performance, the Financial Times reports.
The demand from Calstrs, the California teachers' retirement system, which owns a $250 million stake, was made in a letter to Pepsi's senior independent director, Ian Cook, last month and is echoed by at least one of the company's top 10 shareholders, the Financial Times said.
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, increase in net income, revenue growth, notable return on equity and expanding profit margins. 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 14.5% 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 ($4.55 versus $4.32).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Beverages industry average. The net income increased by 13.1% when compared to the same quarter one year prior, going from $1,075.00 million to $1,216.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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 58.52%. 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 9.63% trails the industry average.
- You can view the full analysis from the report here: PEP Ratings Report