logo
  Join        Login             Stock Quote

Poorly-Received Russian Deal Helps Make Pepsi Shares Cheap

 December 31, 2010 09:06 AM
 


Americans can eat only so many Doritos and drink so much Pepsi. And when Michelle Obama reminds us we really shouldn't be eating and drinking the stuff, the folks at PepsiCo (PEP) get nervous. Sure, they say they're developing healthier foods but the real growth is selling those bad-for-you snacks and drinks (and some "good" foods) in other places around the world.

Take the company's latest move: a $5.4 billion bid for Russian food company Wimm-Bill-Dann Foods (WBD). With the deal, PepsiCo solidifies its presence in a fast-growing economy, racing past arch-rival Coca-Cola (KO). Emerging economies are essential for PepsiCo. The only impressive growth in profit (20%) and sales (9%) in 2009 came from the company's Asia, Middle East & Africa business. But even with double-digit growth in countries like India, that division makes up only 13% of sales. Time to start acquiring. While PepsiCo gains new product lines, including Yogurt and other dairy items, it also will use the latest acquisition to sell more salty snacks ("savory" is the word the company uses) to more Russians.

[Related -Coca-Cola Company (KO) Dividend Stock Analysis]

Investors balked earlier this month at the 32% premium PepsiCo is paying for Wimm-Bill-Dann and Pepsi stock dipped. In 2010, PepsiCo shares lag Coca-Cola and the S&P 500. Now the stock is undervalued, according to YCharts Pro, which rates PepsiCo attractive.

[Related -Pepsico, Inc. (PEP) Dividend Stock Analysis]

PEP, KO, SPY Chart by YCharts

With Wimm-Bill-Dann, PepsiCo would take control of the biggest dairy products and children's foods seller in Russia. With about $2.6 billion in sales estimated this year, Wimm-Bill-Dann serves a market of about 280 million people in Russia and surrounding countries, according to the company's website. PepsiCo badly needs growth businesses. In 2009, sales for the company's biggest division, Frito-Lay North America (Doritos, Lay's, Cheetos), rose 6%, while other divisions (except Asia-Middle East-Africa) declined.


Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageGold Slides On Perfect Storm For Dollar

For all the anticipation surrounding the delivery of the Fed’s statement in the run-up to the September read on...

article imageForward Guidance Now A Nightmare For Fed.

Janet Yellen is probably sorry Ben Bernanke ever embarked on his program of the Fed providing read on...

article imageThis Once-Broken Social Media Stock Is Back On The Warpath

In the brief history of social media stocks, history is repeating itself. Both Facebook (NASDAQ: FB) and read on...

article imageItalian Workers Were Too Productive For 20 Years

The 2008 crisis has resulted in significant downward revisions of potential growth for most advanced read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.