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.
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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.”
