Legg Mason analyst Mark Swartzberg on Tuesday raised his rating on shares of Pepsi Bottling Group Inc. to "buy" from "hold."

In a research note Swartzberg said the basis of the upgrade was an improved assessment of valuation, an upgrade of the outlook for rest-of-year in US pricing, an expected acceleration in US market growth, and an expected narrowing of Pepsi system share losses within the improving market trend.

He said Legg Mason believed that the favorable turn in performance has kicked off a period of sustained share price strength.

Swartzberg did say that there were still risks, including a deteriorating water category performance, especially due to a potential competition from Nestle and worse than expected Mexico performance. But he said: "We believe these and other risks are largely priced into the shares and also believe our estimates adequately reflect their expected impact."