Will PepsiCo (PEP) Stock Be Affected By This Lawsuit?

NEW YORK (TheStreet) -- PepsiCo Inc. (PEP) and its Quaker Oats unit are being sued $2 billion for trademark infringement by the descendants of a woman said to be the inspiration for the “Aunt Jemima” character for its pancake syrup product line, Bloomberg reports.

The suit was filed in the U.S. District Court of Northern Illinois, Chicago, and alleges that the likeness of Anna Short Harrington was used for profit without proper compensation.

Harrington’s descendants are also seeking to have Quaker Oats, the maker of “Aunt Jemima,” products banned in the emerging markets in West Africa, on the grounds that the company should be penalized for “causing collateral economic injury to black Americans,” Bloomberg added.  

A spokeswoman for PepsiCo told Bloomberg the company doesn’t believe Harrington’s heirs have a case.

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Shares of PepsiCo are up 0.50% to $91.67.

Separately, 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 revenue growth, good cash flow from operations, growth in earnings per share, expanding profit margins and increase in stock price during the past year. 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 4.5%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $2,491.00 million or 7.69% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.58%.
  • PEPSICO INC reported flat earnings per share in the most recent quarter. 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 ($4.58 versus $4.32).
  • The gross profit margin for PEPSICO INC is rather high; currently it is at 57.56%. 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 11.70% 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. 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.
  • You can view the full analysis from the report here: PEP Ratings Report
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