The lack of consensus over what the market wants to do has resulted in a trading range for the past ...
A Stock That's Something for Everyone
02/11/2010 2:27 pm EST
Before the stock market opened Thursday, February 11, PepsiCo (NYSE: PEP) reported earnings of 90 cents a share for the fourth quarter of 2009. That was a penny below Wall Street’s projections, but almost twice the 46 cents a share the company reported in the fourth quarter of 2008.
Revenue at $13.3 billion came in just ahead of the analysts’ consensus of $13.26 billion. Sales grew by 4.5% in the quarter from the fourth quarter of 2008. The performance of PepsiCo’s business units followed recent form.
Frito-Lay North America continued to gain market share for the full year in 2009. In the fourth quarter, net revenue grew by 2% and core operating profit climbed by 4%.
The company’s traditional beverage business in North America continued to fight negative trends. For the full year, volume and net revenue fell by 6%. In the fourth quarter, while volume fell by 5%, net operating profit climbed by 10%, thanks to improved productivity in North America and growth in operating profit in Latin America. In the fourth quarter, the company saw improved performance for Gatorade and SoBe Lifewater.
The star, as usual, was PepsiCo’s international unit, which delivered a 17% jump in core operating profit. In the fourth quarter, international revenue grew by 5%, but operating profit fell by 3% as the company invested in infrastructure in the Asia, Middle East, and Africa divisions.
For 2010, the company said it is targeting 11% to 13% “constant currency” growth in earnings per share, including the effects of its plans to acquire its two biggest bottlers, Pepsi Bottling Group (NYSE: PBG) and PepsiAmericas (NYSE: PAS). The company said it expects those acquisitions to close at the end of February. PepsiCo is projecting annual cost savings of about $400 million from the acquisitions once synergies are fully implemented in 2012. For 2010, it expects those synergies to total about $125 million to $150 million.
I don’t see anything unexpected here. The stock remains a very good choice for a period of economic uncertainty. (For another good uncertainty stock, see this recent update on McDonald’s (NYSE: MCD).) Shares of PepsiCo have held up nicely during the correction of 2010, and they pay a dividend yield just a tad under 3%.
As of February 11, I’m leaving my target price at $68 a share by June 2010. (The stock traded just below $61 on Thursday afternoon.)
Full disclosure: I do not own shares of any company mentioned in this post in my personal portfolio.
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