The emerging markets continue to shine for Pepsico Inc. (NYSE: PEP), which is why I'm Reiterating my Buy rating for the company's shares, first recommended on March 13, 2009 at a price of $48.62. If you bought Pepsi then, you're up about 25%.True, North American revenue will be flattish in FY2009, due to the recession, but investors should remain focused on the long-term and larger pictures: namely – Pepsi's emerging market growth opportunities (it has a presence in more than 200 countries) and its rebrand in health/sports drinks.
In addition to its namesake cola, Pepsi has successfully positioned itself in the health and sports drink segment with its Gatorade and Aquafina brands, and Tropicana is still the standard in branded, mass-appeal orange juice. The First Call FY2009/FY2010 EPS estimates for PEP are $3.76 to $4.17.
The company's proposed integration of two of its bottlers, which should be completed by mid-FY2010, represents one hurdle, but that's not nearly enough to blot-out the favorable story for this leading beverage and snack company.
Technically, Pepsi's stock chart is strong – a stairway – one in which the stock rarely touches the key 50-day moving average. That ability to remain above the 50-day moving average indicates that institutional investors (IIs) are continuing to add to their PEP positions.
Stock Analysis: Pepsico Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in PEP now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your PEP position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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