Is Pepsico Doomed to be a Second-Best Brand?
E = Equity to Debt Ratio is Not Very Close to Zero
Taken by itself, Pepsi’s debt-to-equity ratio of 1.30 isn’t out of the ordinary, but it stacks up unfavorably against its competition. We also need to consider total debt and total cash on hand, which for Pepsi is $27.94 billion in debt, and $5.71 billion in cash.
This compares to Coca-Cola, which has a debt-to-equity ratio of 0.99 with $32.74 billion in debt, and $18.08 billion in cash. Smaller soda-industry player Dr Pepper Snapple Group, Inc. (NYSE:DPS) has a debt-to-equity ratio of 1.19, with $2.77 billion in debt and $395 million in cash.
T = Technicals on the Stock Chart Underwhelming
As of December 19, the stock price was 1.87 percent below its 20-day simple moving average, or SMA; 1.11 percent below its 50-day SMA; and 1.06 percent below its 200-day SMA.
Since the beginning of 2012 the stock price has been in an upward trend, rising 5.24 percent this year to date and 6.64 percent year-over-year.
As a benchmark, the S&P 500 has risen 12.43 percent year to date, and 15.67 percent year-over-year.
For comparison, Coca-Cola has climbed 4.88 percent this year to date, while Dr Pepper Snapple has climbed 16.01 percent this year to date.
E = Earnings are Very Strong
Pepsi’s revenues have only dropped once in the past four years, and that was a 0.04 percent drop in 2009. Before that, revenues grew 9.5 percent heading into 2008. Afterwards, they made up for lost time and grew 33.79 percent in 2010, and 14.98 percent in 2011.
|Revenue ($) in millions||39,470||43,250||43,230||57,840||66,500|
|Diluted EPS ($)||3.41||3.21||3.77||3.91||4.03|
Earnings have also shown strong growth and stability. After dropping 5.95 percent in 2008, they grew in each of the three following years, with double-digit growth in 2009.
Quarterly results have also been strong for the soda company. There was a noticeable quarter-to-quarter drop in revenue for the March (first) period, 38.3 percent, but this was a highly seasonal loss. Revenues grew 4 percent year over year.
|Quarter||Sep. 30, 2011||Dec. 31, 2011||Mar. 31, 2012||Jun. 30, 2012||Sep. 30, 2012|
|Revenue ($) in millions||17,580||20,160||12,430||16,460||16,650|
|Diluted EPS ($)||1.25||0.90||0.71||0.94||1.21|
Bottom-line growth in the last two periods has been strong, at 32.2 percent in the second quarter and 28.3 percent in the third quarter.
Excluding structural changes, the company is expecting revenues to grow in the mid-single digits, while full-year EPS may be taking a hit because of unfavorable currency exchange rates.