Pepsi Co.

1
Pepsi Co.

• By Kim Chung
• Jessica Inamine
• Kaera Kamakau
• Andy Kazama
• Kit Wong

2
Analyzing Pepsis Competitive Advantage

• Strengths
• Advertisement and promotion
• New Generation or Pepsi Generation vs. Always
  Coca Cola or Coca Cola Classic.
• Allows them to market youthfulness and openness
• Implementing large marketing projects like
  Project Globe.
• Enormous ad budget of more than 225 million
  dollars a year
• Wise Investments
• Frito Lays
• Pepsi beverage line which currently sales four
  drinks that are in the top ten beverages in the
  world

3
Financial Overview (stock price)
4
Financial Overview

• Volume grew 6.
• Division net revenue grew 8.
• Division operating profit grew 12.
• Earnings per share grew 13.
• Total return to shareholders grew 14, compared
  with 11 for the SP.
• PepsiCo shares grew 12, compared with 9 for the
  SP.
• Cash flow from operations was 5.1 billion and
  management
• operating cash flow was more than 3.7 billion.

5
Financials
6
Equity Analysis

• Cost of Equity CAPM
• K K(rf) Beta Equity Risk Premium
• 4.47 .316 4.5 5.89
• Growth 9.5 (.92/.54)(1/6) 1
• D1 .23
• .23/ (5.89 9.5) - 6.37 ??????
• k lt g so DDM does not work.

7
Equity Analysis

• P/E Ratio (Earnings Multiplier Approach)
• V EPS (next year) forecasted P/E ratio
• 2.85 (22.13 (1 .095)) 69.06
• 53.42 lt 69.06 (Undervalued)

8
Whats To Come

• STAR WARS Episode III and 7-Eleven
• Taco Johns
• Splenda(R) Brand Sweetener
• Hindustan Lever Ltd.
• Rivalry with Coca-Cola

9
Buy / Sell ?