Time to Buy This Beverage Giant: Analyst

PepsiCo’s net income rose 12 percent on strong sales gains abroad and strength in its drinks and snacks division. However, the beverage giant lowered the top end of its guidance for the fiscal year because it expects to be hurt by changes in currency exchange rates. Jonathan Feeney, senior analyst at Janney Montgomery, shared his insights.

“It’s not unusual for Pepsi to be very conservative on their fourth-quarter guidance, but when you take a step back, the [results show] great topline, great cash flows and a company buying back stocks—I think it’s a terrific time to be buying Pepsi right now.”

Feeney said although Pepsi is behind rival Coca-Cola in terms of beverage distribution in the U.S. and around the world, there’s "nothing that matches the competitive advantage" of Pepsi’s Frito-Lay distribution network.

“Pepsi may be behind Coca-Cola in terms of ubiquity, but [Pepsi is] increasing scale in places like Russia and Brazil—and with more products than Coca-Cola has, so you’re seeing increased scale of distribution at a faster rate,” he explained.

“So the profit growth will be better.”

Scorecard—What They Said:

  • Feeney's Previous Appearance on CNBC (Aug. 25, 2010)
  • Gorham's Previous Appearance on CNBC (Sept. 30, 2010)

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Feeney has investment banking clients who own shares of PEP.