Morningstar

Pepsi Shares Pop, yet Remain Attractive

The wide-moat firm's enviable portfolio of beverage and food brands support its edge.

Securities In This Article
PepsiCo Inc
(PEP)

Wide-moat

We think performance in the firm's North American beverage business, which has averaged roughly 3% declines the last 12 months, seems to be trending in the right direction as the firm's investments behind its core beverage brands (such as increased media spending for trademark Pepsi) begin to take hold. As evidence, volumes in this business were down just 2%, versus a 3% decline in the first quarter, even though pricing within this segment remains solid (up 1% during the quarter). Further product innovation, including recently launched Gatorade Zero and the return of seasonal brand Mountain Dew Baja Blast, should help to sustain positive momentum across its largest beverage brands over the remainder of the year. Overall, we posit its enviable portfolio of beverage and food brands (with 22 brands that each generate $1 billion in annual sales) has helped it ingrain itself in retailers' supply chains and secure valuable shelf space, supporting its edge.

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About the Author

Erin Lash, CFA

Sector Director
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Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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