Pepsico (PEP)

PepsiCo International has seen steady, strong growth in recent years. In the latest quarter rising sales volume in Asia helped offset rising input costs. "Overall Pepsi has shown a much bigger progress than Coke over the past 10 years. In addition, it’s trading at a bargain multiple relative to its biggest competitor. And last but not least, its dividend growth is much higher than Coke. I would consider adding to Pepsi on dips below $68. I might also consider adding to Coca-Cola below $51."

Over the past several weeks the company has traded below 68 on a couple of occasions. I am considering buying some PEP this week, as long as the price is below $68.

In addition to that PEP recently announced an increase in its annual dividend from $1.50 to $1.70, which is a healthy 13.33% raise. The quarterly dividend of $0.425 is payable June 30, 2008, to shareholders of record on June 6, 2008.The ex-dividend date is June 4.

The diversity of PEP's product line gives it a certain amount of protection against poor conditions in any one of its markets. Frito Lay is a strong performer particularly in poor economic conditions and helps to counteract the weakness on the beverage side.

PepsiCo International has seen steady, strong growth in recent years. Frito-Lay products are showing particular growth potential, which looks to continue into the future.

PepsiCo's implementation of the Smart Spot program has been very successful, garnering the company some good publicity.

PepsiCo's offer to acquire its two biggest bottlers - Pepsi Bottling Group and PepsiAmericas - will greatly improve the company's competitive position. Much of the improved efficiencies stem from the changing beverage market; non-carbonated drinks have grown to 65% of the North American beverage market from 40% ten years ago. PepsiCo produces the majority of its own non-carbonated sports drinks and juices, while its bottlers produce the majority of its sodas. By consolidating the three different distribution operations, PepsiCo can more quickly and efficiently produce and market its non-carbonated beverage lines and realize vast economies of scale. If the deal goes through, PepsiCo executive expect first year synergies to increase pretax profit by $200 million.

Despite growth in revenues of 3% to nearly $13 billion, Pepsi's Q4 profits fell 43% to $719 million. The reason for this drop, however, is $770 million in one-time charges relating to restructuring and impairment. Pre-charge net earnings were $1.39 billion, a 9.4% increase from Q4 2007. The company is still growing its revenue, despite economic weakness, and it is well positioned to withstand the recession.