PepsiCo Structure

CE0- Indra Nooyi

Global Market leader in salty snacks, 2nd in beverages

50% of revenues from overseas markets

PepsiCo Strategy

No longer a “One-trick Pony” Pressure to split

Bottling acquisitions New products and healthier options

Stock Analysis

% Growth of Stocks (last 5 years) PEP= 79%

KO- 65%

DPS- 172%

NASDAQ-98%

S & P 500- 99%

Stock Analysis Cont.

PEP

Price=$94.60

EPS= 4.42

P/E= 18.78

Market Cap= $126.45 B

KO

Price= $41.03

EPS= 1.982

P/E= 20.84

Market Cap= $178.8 B

DPS

Price= $66.80

EPS= 3.182

P/E= 15.62

Market Cap= $9.749 B

Profit Margin

Net income divided by total sales

Shows how much of the every dollar sold in put into earnings

In 2013: PEP – 10.15%

KO – 18.32%

DPS – 10.41%

Profit Margin Five Year Analysis

2009 2010 2011 2012 2013

13.75

10.939.69 9.43 10.15

22.02

33.63

18.42 18.78 18.32

10.03 9.3710.27 10.49 10.41

Profit Margin

Pepsi Coke Dr. Pepper

EBITDA Margin

EBITDA divided by total sales

In 2013: PEP – 18.75%

KO – 29.70%

DPS – 14.99%

EBITDA Margin Five Year Analysis

Return On Assets Ratio

Net Income divided by total assets

Shows the company’s efficiency in using assets to generate earnings

In 2013: PEP – 8.70%

KO – 9.53%

DPS – 7.61%

ROA Five Year Analysis

2009 2010 2011 2012 2013 ROA

15.68

11.7

9.148.38 8.86

15.3

19.42

11.21 10.869.74

6.37 5.996.68 6.91 7.29

ROA

Pepsi Coke Dr. Pepper

Return On Equity Ratio

Net Income divided by total equity

Reveals how much profit a company creates with shareholder investments

In 2013: PEP – 28.89%

KO – 26.03%

DPS – 27.39%

ROE Five Year Analysis

2009 2010 2011 2012 2013

41.25

33.96

30.9228.87 28.89

30.15

42.32

27.37 2826.03

19.16 18.70

25.6727.69 27.39

Return on Equity

Pepsi Coke Dr. Pepper

Total Debt Ratio

Total debt divided by total assets

High debt leverage is a high risk/high reward proposition

In 2013: PEP – 68.6%

KO – 63.1%

DPS – 72.2%

Total Debt Ratio Five Year Analysis

2009 2010 2011 2012 2013

0.578

0.6890.717 0.701 0.686

0.49

0.5740.604 0.619 0.6310.636

0.7220.756 0.744

0.722

Total Debt Ratio

Pepsi Coke Dr. Pepper

Cash Coverage Ratio

EBIT divided by interest

Shows how well the company can cover the interest they owe with their cash on hand

In 2013: PEP – 13.68%

KO – 30.05%

DPS – 7.30%

Cash Coverage Ratio Five Year Analysis

2009 2010 2011 2012 2013

25.46

12.6914.51

13.22 13.68

29.68

22.39

33.11

35.73

30.05

5.42

9.1511.14 10.74

7.3

Cash Coverage Ratio

Pepsi Coke Dr. Pepper

Times Interest Earned Ratio

EBITDA divided by total interest

Shows how much the company’s tangible earnings can cover the total interest liability

In 2013: PEP – 9.75%

KO – 24.78%

DPS – 4.40%

Times Interest Earned Five Year Analysis

2009 2010 2011 2012 2013

20.35

9.1110.32

9.23 9.75

25.2

19.43

27.43

29.74

24.78

3.57

6.418.11 7.82

4.4

Times interest Earned

Pepsi Coke Dr. Pepper

Specific Risks

Consumer trends

Increased cost of raw materials

Expansion into riskier markets

Disruption of the supply chain

Damage to reputation

Cybersecurity

Loss of any key customer

Systematic Risks

Risks Changes in the legal and regulatory environment

New taxes

Unfavorable economic conditions

Fluctuations in exchanges rates

Beta: 0.37

CAPM Risk free rate of return: 2.3%

Expected market return: 10.3%

Cost of capital : 5.26%

PEP Growth Rate

Constant Growth Formula

September 3 2014: 0.655 dividend

September 2010: 0.480 dividend

Growth Rate of 0.08

Coca-Cola (KO) Growth Rate: 0.09

Dr. Pepper/Snapple (DPS) Growth Rate: 0.13

“International market expansion strategy through mergers and acquisitions.”

Long Term Investments Increased nearly 20% over past 3 years

Goodwill account 16,613,000,000 (60% increase from 2009)

Higher than KO and DSP combined in 2013

“Focus on emerging markets.”

Coca-Cola’s international success

China, India, and Russia 2006: 26%

2012: 37%

“Innovation in marketing initiatives.”

Marketing $1.7 billion

50% increase