Analysis - PepsiCo rides high but Peltz clouds horizon
PepsiCo released its Q1 results last week
PepsiCo CEO Indra Nooyi was bullish when pushed last week for her thoughts on who will replace her.
And rightly so. With strong first-quarter results that had the soft drinks and snacks maker beating market estimates - and taking beverage share from The Coca-Cola Co - Nooyi should be secure enough to perhaps expect another eight years at PepsiCo's helm.
“First-quarter earnings came in well ahead of our estimates, even excluding non-operating items, and we reiterate our preference for PepsiCo over Coke,” CLSA analyst Caroline Levy said in a note yesterday (21 April).
Levy added that performance in Mexico had not been as badly hit by new taxes in the country, and while she had sanctioned for a 4% volumes drop in PepsiCo Americas Beverages, the unit had come out flat.
Most impressive to Levy, though, was PepsiCo's positive sales performance in the UK. Compare this, the analyst said, to Coca-Cola's 12% volume decline in the country during its own first-quarter.
Wells Fargo analyst, Bonnie Herzog, highlighted the success of PepsiCo's innovation platform that has seen new products in the firm's Mountain Dew Kickstart portfolio come through this year. Herzog said that she was further encouraged by Nooyi's commitment to R&D and marketing despite cost-cutting programs.
Meanwhile, Stifel analyst Mark Swartzberg, added a note of caution amid the optimism. He warned that ongoing moves by investor Nelson Peltz to force PepsiCo to split its drinks and snacks business could yet derail the company's year. Peltz, Swartzberg said, “is not tiring from fighting for strategy change”.
“We would not be surprised to see a proxy battle into year-end/early next year,” Swartzberg added.
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