pepsico structure ce0- indra nooyi global market leader in salty snacks, 2 nd in beverages 50% of...
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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