Will PepsiCo (PEP) Stock be Impacted Today by CEO Succession Pressure?

NEW YORK (TheStreet) -- PepsiCo Inc. (PEP) CEO Indra Nooyi may be facing pressure by investor Nelson Peltz to develop a succession plan as early as this summer, the New York Post reports.

Peltz's Trian Partners owns 1.2% of the soda and snacks maker.

On January 16 the firm announced a deal with PepsiCo that placed Peltz's advisor William Johnson, former CEO of H.J. Heinz (HNZ) , on the PepsiCo bard in exchange for agreeing not to launch a proxy fight, the Post added.

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Some have seen this move as a truce between the two sides but sources speaking with the Post say this isn't the case and once Johnson joins the board in March he will push for changes.

CEO Nooyi has been leading PepsiCo for eight years and has no clear successor lined up.

If Peltz is able to put enough pressure on the company he will be able to help choose PepsiCo's next CEO, who may be open to his suggestion of splitting the company's soft drink and Frito-Lay snacks businesses, something he has been pushing for over the last few years, the Post added.

Shares of PepsiCo closed at $96.72 on Tuesday afternoon.

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, notable return on equity, solid stock price performance, growth in earnings per share and good cash flow from operations. 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:

  • PEP's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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 has improved earnings per share by 7.3% 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 ($4.59 versus $4.32).
  • 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.
  • Net operating cash flow has increased to $4,021.00 million or 10.25% when compared to the same quarter last year. In addition, PEPSICO INC has also modestly surpassed the industry average cash flow growth rate of 1.45%.
  • You can view the full analysis from the report here: PEP Ratings Report

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