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Analysis of PepsiCo 3q11 Earnings and Conference Call

 

PepsiCo (PEP) reported its earnings earlier today. I tuned into the conference call earlier this morning. The company reported EPS of $1.31 versus consensus estimates of $1.30. Revenues of $17.58 billion exceeded expectations of $17.19 billion. Strong results in Latin America, Europe and Asia helped to spur 7% year-over-year division operational growth. PepsiCo America Beverages continues to struggle with operating profit declining 2.5% for that segment. Interestingly enough, Operating profit at Frito Lay North America (FLNA) of $918 million is catching up to PepsiCo America Beverages (PAB) operating profit of $992. It is only a matter of time until FLNA overtakes PAB. I would note that volumes for PAB came in flat during the quarter but are showing some improvement. 

 

The company maintained its full year guidance but refrained from providing 2012 guidance due to the uncertainty in the commodity markets. As a side note, the company still expects to pass on higher prices to customers in the next year, despite recent declines in commodity costs. 

 

PepsiCo when last reporting quarterly results hit the market with a confusing accounting change. The accounting change was just putting the company on an apples-to-apples comparative basis with Coca Cola (KO). However, it was interpreted as a negative bombshell. The stock was up close to 2% after the conference call and held those gains in early trading today. 

 

Coca Cola has outperformed PepsiCo but I would not chase Coke on that basis. PepsiCo sells at about 13 times 2012 forward earnings estimates. Coca Cola on the other hand is a bit richer at 16 times forward earnings estimates. The dividend still favors PepsiCo by about 50 bps in yield per year. I am inclined to hold PepsiCo here, but would scale out of the stock, as a source of cash when the stock gets back to about $66. 

 

PepsiCo is a long term holding and pick in the Lake View Restaurant & Food Chain Report newsletter

 

Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long PEP stock — although positions can change at any time.

Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com 

You can access more daily commentary from Scott Rothbort, on Wall Street All-Stars.

 

 

 

 



Posted By Scott Rothbort at October 12, 2011

Don't Equate Deckers Outdoor With Crocs

Crocs (CROX) the footwear company stunned investors with a significant earnings warning. The company provided guidance well below previous EPS expectations of 40 cents a share. CROX now expects to earn 31 to 33 cents for the September quarter. Revenue is expected to range between $273 million and $275 million, below expectations of $280 million. Shares of CROX are giving up nearly 1/3 of its value as a result of these revelations. 

So what do itchy finger traders do? They begin to attack shares of Deckers Outdoor (DECK). Understand that the similarities between CROX and DECK end at footwear. CROX, for all intents and purposes has one product, a rubberized sandal which is primarily used in warm weather. Sure they are trying to diversify to boots and sneakers but let's get serious, this is a one trick pony. DECK on the other hand is a far more diverse footwear company with seven brands transcending a variety of styles and weather conditions. I am a long time owner of DECK stock,  with a cost basis less than half of the current market price, even when factoring in today's several point decline. 

DECK sells for 21 times trailing earnings and 17 times forward earnings. Earnings are expected to grow by 20% in 2011 and 21% in 2012. Earnings growth for DECK has come both from organic sources and acquisitions over the long term. I expect that despite the CROX revelations, DECK will continue to drive that long term growth of a least high teens to low twenties percentages.

Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long DECK stock — although positions can change at any time.

Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com 

You can access more daily commentary from Scott Rothbort, on Wall Street All-Stars.

 

 

 



Posted By Scott Rothbort at October 18, 2011

Scott Rothbort

About Me :

SCOTT ROTHBORT

THE FINANCE PROFESSOR

 

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational website TheFinanceProfessor.com and a frequent contributor the TheStreet.com where he also writes a weekly article as The Finance Professor

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com.

 


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