The world's largest maker of Pepsi-Cola beverages is not PepsiCo (NYSE: PEP) itself, but a 1999 PepsiCo spin-off with the clearest mission statement in corporate America.
Pepsi Bottling Group (NYSE: PBG) is engaged in the manufacture, sale and distribution of Pepsi-Cola beverages. The firm operates about 300 manufacturing and distribution facilities and delivers Pepsi-Cola, Aquafina water, Lipton's Iced Tea, Mountain Dew, Tropicana juice, Starbucks Frappuccino and Slice to stores and third-party distributors. PBG operates in North America and Europe, accounting for more than half of the Pepsi-Cola beverages sold in North America and about 40% of the worldwide volume. Coca-Cola Enterprises (NYSE: CCE) is a major competitor.
There was good news for PBG investors last week, when Goldman Sachs raised its rating on the beverage group to "attractive." The analyst noted the potential for improved performance, as costs for most of the commodities used to make and bottle beverages stabilize.
PBG shares popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the shares with four "strong buys", one "buy", nine "holds" and one "sell". The PBG P/E ratio (16.60), PEG ratio (1.70), Price to Sales ratio (0.64), Price to Book ratio (3.76), Price to Cash Flow ratio (7.01), Price to Free Cash Flow ratio (30.50), EPS Growth rate (14.75%) and Return on Equity (24.91%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 61% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $30.13 and $37.35. A stop-loss of $32.25 looks good here. Note that the firm is next expected to announce quarterly results in the first week of October.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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