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Not all upside surprises are created equal. Cramer got excited when he saw that Pepsi beat expectations by three cents Thursday. Here comes a nice upside surprise, right? Wrong. PEP [PEP
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] ticked lower and ended the day down a couple of points. It seemed the market decided Pepsi didn’t deserve its premium multiple after all.
CEO Indra Nooyi disagreed. Speaking with Cramer by telephone, she said Pepsi’s numbers, including 4% volume growth, 11% revenue growth and 10% operating profit growth “knock the socks off anything.”
Raw costs and inflation remain issues for Pepsi, but Nooyi said the company had the experience and plans to deal with commodity prices and cover any inflation headwind. The company is committed to 10% EPS growth, she said.
Investors can point to Pepsi’s “fabulous” international growth as a big part of the reason for its better-than-expected earnings, Cramer said. But domestic growth has been sluggish, and that could in part why the stock was knocked down.
Nooyi contended that North American growth was "good" and wouldn’t say when, if ever, Pepsi plans on being more than 50% internationally diversified, although she told Cramer by 2012 investors “should see a very nice spread.”
Nooyi thinks of Pepsi as a mutual fund. The company is essentially a portfolio, and like other portfolios, different pieces perform better than others at different times, she said. “But taken together, the portfolio works.”
The bottom line? Be price sensitive about packaged goods companies like Pepsi, Cramer said. The quarter was a mixed bag and people should not assume the market was crazy to take it down a couple points, he said. If inflation comes down, Cramer thinks PEP would be poised to rip right through its high. He would wait until the stock dips below $70 before pulling the trigger.
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