Could It Be Splits-ville for PepsiCo (PEP) Too?
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PepsiCo (NYSE: PEP) shares are looking resilient amid overall market pressure Monday, possibly on the heels of a bullish article from Barron's over the weekend.
One of the main concerns addressed by the publication is Pepsi's sweet and salty portfolio commitment as it shifts focus to more healthy offerings. Some suggest the move is too soon, saying some work still needs to be done on its core Pepsi-Cola segment.
Pepsi currently has 19 brands with $1 billion or more in annual sales, according to Barron's. Frito-Lay itself holds a 60 percent U.S. market share for salty snacks.
News last Thursday that Kraft (NYSE: KFT) will be splitting into two companies may have investors thinking, "should Pepsi attempt the same move?" Frito-Lay is arguably the strongest portion of Pepsi, and CEO Indra Nooyi recently said it might be the best consumer-products company if it were a "stand alone" business.
Pepsi has been reluctant to split off the segment, citing the "power of one" -- Pepsi shareholders might benefit more from lower-costs associated with joint marketing programs and other initiatives.
Down about 8 percent since it's quarterly earnings report in July, Pepsi reported a 10 percent increase in net income, but analysts thought results were messy as earnings benefited from a lower tax rate and several one-time items. Further, Pepsi lowered its growth outlook from 7-8 percent to a range of 5-7 percent for 2011.
Barron's notes Pepsi's second-quarter issues were largely attributed to its North American beverage segment, which saw a 7 percent drop in core profit. Pepsi-Cola is now third most popular soda in the U.S., behind two Coca-Cola products. It's Gatorade brand was being left behind for Coca-Cola's Powerade, though some contend the segment is on the rebound. Also, Tropicana has been losing juice market share to Coca-Cola's Simply juice brand.
Trading for 14.5x expected fiscal 2011 earnings, PepsiCo is at a sharp discount to the rival Coca-Cola's (NYSE: KO) valuation of 17x earnings. Shares are down about 1.4 percent over the last 12-months, compared with a gain of 18 percent for Coca-Cola.
PepsiCo still has a wide selection of strong brands, and investors might want to hold the stock for the potential split of its snacks and beverages businesses.
Shares are down about 0.8 percent on the session, compared with a nearly 3 percent drop on the Dow.
One of the main concerns addressed by the publication is Pepsi's sweet and salty portfolio commitment as it shifts focus to more healthy offerings. Some suggest the move is too soon, saying some work still needs to be done on its core Pepsi-Cola segment.
Pepsi currently has 19 brands with $1 billion or more in annual sales, according to Barron's. Frito-Lay itself holds a 60 percent U.S. market share for salty snacks.
News last Thursday that Kraft (NYSE: KFT) will be splitting into two companies may have investors thinking, "should Pepsi attempt the same move?" Frito-Lay is arguably the strongest portion of Pepsi, and CEO Indra Nooyi recently said it might be the best consumer-products company if it were a "stand alone" business.
Pepsi has been reluctant to split off the segment, citing the "power of one" -- Pepsi shareholders might benefit more from lower-costs associated with joint marketing programs and other initiatives.
Down about 8 percent since it's quarterly earnings report in July, Pepsi reported a 10 percent increase in net income, but analysts thought results were messy as earnings benefited from a lower tax rate and several one-time items. Further, Pepsi lowered its growth outlook from 7-8 percent to a range of 5-7 percent for 2011.
Barron's notes Pepsi's second-quarter issues were largely attributed to its North American beverage segment, which saw a 7 percent drop in core profit. Pepsi-Cola is now third most popular soda in the U.S., behind two Coca-Cola products. It's Gatorade brand was being left behind for Coca-Cola's Powerade, though some contend the segment is on the rebound. Also, Tropicana has been losing juice market share to Coca-Cola's Simply juice brand.
Trading for 14.5x expected fiscal 2011 earnings, PepsiCo is at a sharp discount to the rival Coca-Cola's (NYSE: KO) valuation of 17x earnings. Shares are down about 1.4 percent over the last 12-months, compared with a gain of 18 percent for Coca-Cola.
PepsiCo still has a wide selection of strong brands, and investors might want to hold the stock for the potential split of its snacks and beverages businesses.
Shares are down about 0.8 percent on the session, compared with a nearly 3 percent drop on the Dow.
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