2. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
INTRODUCTION
BEFORE WE BEGIN...
3. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
TICKER SYMBOL publicly traded shares of a stock on the stock market.
used to identify
KO
Coca Cola
PEP
Pepsi Co.
4. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
COMPANY BACKGROUND
KO PEP
HEADQUARTERS ATLANTA, GEORGIA NEW YORK
ESTABLISHED 1892 1965
INVENTED BY INVENTED BY
ORIGIN OF BEVERAGE
JOHN PEMBERTON CALEB BRADHAM
PERFORMANCE
COMPANY MOTTO LIVE POSITIVELY
WITH PURPOSE
TRADED IN NYSE NYSE
5. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
PRODUCT OFFERING
Other stuff
77% Snacks and other stuff
Beverages
<50%
Beverages
SELLING BEVERAGES AND
CARBONATED SOFT DRINKS
17. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
GDP GROWTH
PERCENT; QUARTER OVER QUARTER, ANNUALIZED
Developing 12
Economies 10
8
WORLD
6
4
2
0
-2
-4
Advanced -6
Economies -8
-10
2007 2008 2009 2010 2011 2012
Higher income of developing countries
leading to soft drink industry growth
18. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
INFLATION
PERCENT; YEAR OVER YEAR, PERIOD AVERAGE CONSUMER PRICE INDEX
10
Developing 8
Economies
6
4
WORLD
Advanced 2
Economies
0
-2
2007 2008 2009 2010 2011 2012
Inflation reduces operating margin
of the soft drink industry
20. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
KEY TRENDS Carbonate consumption decreasing
OTHERS
RTD TEA 5% Consumers more health
& COFFEE
9%
CARBONATES conscious
41%
FUNCTIONAL
DRINKS
10% They consume less
carbonates
JUICES
17% PEP may be better off as
BOTTLED WATER they are more diversified
20%
23. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
STRENGTHS WEAKNESS
Strong brand equity Product recalls
Global presence Dependence on
bottling partners
OPPORTUNITY THREATS
Strategic acquisitions Highly competitive
and agreements market
Potential in emerging Volatile raw
markets material costs
24. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
STRENGTHS WEAKNESS
Sturdy R&D activities Declining profitability
Strong market foothold Declining liquidity position
Diversified brand portfolio Dependence on a few
customers
OPPORTUNITY THREATS
Strategic agreements Pending litigations
Growing organic foods Rising commodity prices
Growth in bottled water Stringent government
market regulation
25. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
PRODUCT DIVERSIFICATION
More than 3300 beverage products Leadership position in snacks segment: Lays.
26. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
BRAND PORTFOLIO
1 23
# #
Brand
(Interbrand) Brand
(Interbrand)
Owns / licenses more than 500 brands. Pepsi alone generates more than $15,000m of
annual sales for 20 brands in portfolio
27. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
GEOGRAPHICAL MARKET EXPANSION
Operates in more than 200 countries Operates in more than 200 countries
28. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
ROBUST MANUFACTURING AND DISTRIBUTION FACILITIES
Largest beverage distribution systems 135 production plants
30 manufacturing plants 2535 warehouses
112 bottling and canning plants 80 bottling plants
29. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
BOTTLER CONSOLIDATION
CCE PBG & PAS
31. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
CAPITAL STRUCTURE 2011
KO PEP
BONDS/DEBT
BONDS/DEBT 53% 1%
BONDS/DEBT
28%
PREFERENCE STOCK
COMMON STOCK COMMON STOCK
72% COMMON STOCK
46%
32. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DEBT-EQUITY RATIO
PEP
KO
33. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DEBT-EQUITY RATIO
PEP
FINANCIAL CRISIS
Reliance on Debt
Very cheap Bonds
Low US interest Rates KO
34. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DEBT-EQUITY RATIO
PEP: Expansion into Russia PEP
Acquired Bottlers
Increase in 17 billion USD in debts
Increase in 5 billion USD in equity
KO
35. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DEBT-EQUITY RATIO
PEP
KO
KO: Expansion into China
Acquired Bottlers
Increase in 12 billion USD in debts
Increase in 6 billion USD in equity
4.5 billion USD worth of Bonds (High Grade Corporate Bonds)
37. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
Invested 3 new bottling Building a new beverage
plants in China plant in Russia
Acquired Honest Tea Completed acquisition
an organic bottled tea of Wimm-Bill-Dann
company
38. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
Opened 3 new plants in China
Honest Tea is America’s top
selling organic bottled tea
39. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
Lower cost of production
Wimm-Bill-Dann produces 1000 different
types of yogurt and dairy drinks as well as
150 types of fruit juices and fruit drinks in
Europe
40. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
FUNDAMENTAL
ANALYSIS
42. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
BETA NYSEmeasure of a stock's volatility in relation to the market.
Beta is a
KO 0.59
PEP 0.54
INDUSTRY 0.60
43. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
QUICK RATIOor quick assets to extinguish current liabilities immediately.
Ability to use its near cash
KO 1.02
PEP 0.89
INDUSTRY 1.1
CURRENT RATIO short-term obligations.
Measures a company's ability to pay
KO 1.17
PEP 1.10
INDUSTRY 1.2
44. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DEBT-EQUITY RATIO
KO 0.75
PEP 1.17
INDUSTRY 0.94
PEP
KO
46. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
P/E RATIO TTM to profit earned per share.
Price paid per share relative
KO 12.5%
PEP 15.5%
INDUSTRY 14.5%
48. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
Dividend paid out each year relative to its share price.
Dividends
Yield
KO 2.77%
PEP 3.32%
49. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DIVIDEND PER SHARE share issued.
The the sum of declared dividends for every ordinary
2007 2008 2009 2010 2011
KO $1.36 $1.52 $1.64 $1.76 $1.88
PEP $1.43 $1.65 $1.77 $1.89 $2.06
Industry
Nestle $0.85 $1.20 $1.19 $1.34 $1.85
Dr Pepper (DPS) - $0.00 $0.15 $0.90 $1.28
50. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DIVIDEND PER SHARE
$2.25
KO PEP NESN DPS
PEP
$1.69
KO
$1.13
$0.56
$0
2007 2008 2009 2010 2011
51. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
DIVIDEND PAYOUT RATIO
The percentage of earnings paid to shareholders in dividends.
5 year
2009 2010 2011
growth
KO 55.97% 30.27% 33.38% 9.46%
PEP 48.21% 46.95% 49.11% 13.35%
Industry
9.65%
54. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
EPS: profit allocated to each outstanding share of common stock
The
EARNINGS PER SHARE TTM
KO 5.44
PEP 3.99
55. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
NET INCOME Growth (5 year average)
KO 19.37%
PEP 9.23%
INDUSTRY 14.72%
Net Income TTM
56. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
RATIO COMPARISON
KO PEP
Quick Ratio 1.02 0.89
Current Ratio 1.17 1.11
Debt-Equity Ratio 0.75 1.17
P/E Ratio TTM 12.5% 15.5%
Profitability 29.8% 10.15%
EPS 5.44 3.99
Dividend Yield 2.77% 3.32%
Dividend Per Share 1.88 2.06
Dividend Payout Ratio 33.38% 49.11%
BETA 0.59 0.54
OVERALL More Profitable Pays More Dividends
62. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
WHEN TO BUY?
63. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
WHEN TO BUY?
KO PEP
BUY at HOLD
MA200 Price (~$67) or OR buy at support
support levels of levels of
$64.57 or $63.49 $60.61 or $59.44
67. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
MACRO is more diversified
PEP
ANALYSIS Carbonates are pulling the industry back
STRATEGY &
Both are on par as they are in an oligopoly
INVESTMENTS
What one does will affect the other
FINANCING in debt than PEP
KO is less
ACTIVITIES
Less effect during recession
68. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
FUNDAMENTAL
KO has better profitability
PEP gives out better dividends
ANALYSIS
TECHNICAL and long term buy
KO is better short
PEP is losing investors confidence
ANALYSIS
69. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
Team’s Choice
STRONG BUY
KO
IN VIEW OF ECONOMIC CONDITIONS
STRONG FUNDAMENTALS
70. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
PEP
HOLD, biased towards selling
Fundamental Analysis shows below-average performance
Technical Analysis confirms investors’ sentiments
71. Introduction Macro Analysis Strategies Financing Investments Fundamental Analysis Technical Analysis Recommendations
THE END
Questions?