July 16, 2017

NYSE: PEP

PEPSICO INC
BUY HOLD SELL

BUY
RATING SINCE 07/13/2010
A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F TARGET PRICE $131.69

Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
$3.22 2.82% 0.69 $162.5 Billion $98.50-$118.24 $114.02

Sector: Consumer Non-Discretionary Sub-Industry: Soft Drinks Source: S&P

Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years
PEP BUSINESS DESCRIPTION
PepsiCo, Inc. operates as a food and beverage 135
company worldwide. Its Frito-Lay North America TARGET
TARGET
TARGETPRICE
TARGET PRICE
PRICE$131.69
$131.69
$131.69 130
segment offers Lay's and Ruffles potato chips;
125
Doritos, Tostitos, and Santitas tortilla chips; and
Cheetos cheese-flavored snacks, branded dips, 120
and Fritos corn chips. 115

STOCK PERFORMANCE (%) 110

3 Mo. 1 Yr. 3 Yr (Ann) 105
Price Change 1.18 3.73 8.26 100
GROWTH (%) 95
Last Qtr 12 Mo. 3 Yr CAGR 90
Revenues 2.04 1.81 -1.65 Rating History
Net Income 4.98 31.40 -0.16 BUY
EPS 5.79 32.67 2.06
Volume in Millions
50
RETURN ON EQUITY (%)
PEP Ind Avg S&P 500 25
Q2 2017 54.92 22.47 13.16
Q2 2016 42.34 18.13 11.83 0
2015 2016 2017
Q2 2015 39.91 15.73 13.71 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History

P/E COMPARISON RECOMMENDATION

We rate PEPSICO INC (PEP) a BUY. This is based on the convergence of positive investment measures, which
should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen
in multiple areas, such as its growth in earnings per share, revenue growth, notable return on equity,
expanding profit margins and increase in net income. We feel its strengths outweigh the fact that the
company shows weak operating cash flow.

HIGHLIGHTS
PEPSICO INC has improved earnings per share by 5.8% in the most recent quarter compared to the same
24.21 38.88 24.41 quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the
past two years. We feel that this trend should continue. During the past fiscal year, PEPSICO INC increased
PEP Ind Avg S&P 500
its bottom line by earning $4.36 versus $3.67 in the prior year. This year, the market expects an improvement in
earnings ($5.16 versus $4.36).
EPS ANALYSIS¹ ($)
Despite its growing revenue, the company underperformed as compared with the industry average of 10.2%.
Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue appears
to have trickled down to the company's bottom line, improving the earnings per share.

The company's current return on equity greatly increased when compared to its ROE from the same quarter
Q3 0.36

one year prior. This is a signal of significant strength within the corporation. Compared to other companies in
the Beverages industry and the overall market, PEPSICO INC's return on equity significantly exceeds that of
Q1 0.81
Q2 1.33

Q4 1.17

Q1 0.64
Q2 1.38
Q3 1.37
Q4 0.97

Q1 0.91
Q2 1.46

both the industry average and the S&P 500.

2015 2016 2017 The gross profit margin for PEPSICO INC is rather high; currently it is at 58.51%. Regardless of PEP's high
NA = not available NM = not meaningful
profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the
gross profit margin, PEP's net profit margin of 13.39% compares favorably to the industry average.
1 Compustat fiscal year convention is used for all fundamental
data items.
In its most recent trading session, PEP has closed at a price level that was not very different from its closing
price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors.
Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can
fall in an overall down market. However, in any other environment, this stock still has good upside potential
despite the fact that it has already risen in the past year.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 1
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: PEP

PEPSICO INC
Sector: Consumer Non-Discretionary Soft Drinks Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
$3.22 2.82% 0.69 $162.5 Billion $98.50-$118.24 $114.02

PEER GROUP ANALYSIS INDUSTRY ANALYSIS

REVENUE GROWTH AND EBITDA MARGIN*
The US beverage industry is broadly divided into alcoholic and non-alcoholic segments. The alcoholic
segment includes beer, wine, and spirits. The non-alcoholic segment includes carbonated soft drinks (CSDs),
60%

CCE fruit beverages, bottled water, milk, sports drinks, energy drinks, ready-to-drink (RTD) tea, and RTD coffee.
FA

The industry has around 4000 manufactures and distributors generating upwards of $140 billion in annual
VO

revenue. The industry is highly competitive on pricing, packaging, marketing, and developing new products.
RA
BL

The two biggest players are Coca-Cola (KO) and PepsiCo (PEP), which together hold more than 50% of the
E

COKE market.

The non-alcoholic beverage segment represents 60% of the market. Premium wineries revenue has
registered annual growth of 8% over recent years and energy drink volume continues to surge.
Revenue Growth (TTM)

COT
FIZZ Faced with limited volume growth in developed markets, high-growth developing markets are increasingly
MNST
important to the bottom line. Mergers, acquisitions, and partnerships are on the rise as food and drink brands
UN

AKO.A AKO.B
FA

look to establish or expand their presence in international markets. PepsiCo and Pepsi Bottling Group Inc.
VO

DPS PEP
-10%

acquired a 75% stake in Russia’s Lebedyansky JSC for around $2.0 billion in March 2008 and Coca-Cola bid
RA
B

$2.3 billion for China Huiyuan Juice Group Ltd. in September 2008.
LE

5%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $1.6 Billion and $189.8 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
REVENUE GROWTH AND EARNINGS YIELD
60%
KO 40%
Health and convenience remain major challenges and play a significant role in shaping product strategies.
Beverages have been in the spotlight over the last five years because of research that links ingredients, such
as sugars and acids, with prevalent chronic diseases, such as obesity, diabetes, and dental decay. Rising
environmental concerns also present a challenge. The production, distribution, and sale of beverages in the
United States are subject to the Federal Food, Drug, and Cosmetic Act, the Dietary Supplement Health and
Education Act of 1994, and the Occupational Safety and Health Act. These acts, various environmental
statutes, and numerous other federal, state, and local statutes are applicable to the production,
transportation, sale, safety, advertisement, and ingredients. Industry fragmentation also poses a major threat.
To overcome this, companies are acquiring smaller players or developing independent plants. Coca-Cola’s
Monster distribution will help bottlers realize economies of scale in their direct store distribution system.

PEER GROUP: Beverages

CCE
Recent Market Price/ Net Sales Net Income
FA

Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M)
VO
RA

PEP PEPSICO INC 114.02 162,537 24.21 63,301.00 6,816.00

BL
E

COKE KOF COCA-COLA FEMSA SAB DE CV 87.84 4,613 27.45 9,192.47 661.78
FIZZ NATIONAL BEVERAGE CORP 96.15 4,479 47.13 793.89 95.42
AKO.B EMBOTELLADORA ANDINA SA 25.32 3,780 26.38 2,734.73 151.26
AKO.A EMBOTELLADORA ANDINA SA 22.60 3,780 23.54 2,734.73 151.26
Revenue Growth (TTM)

COT MNST MONSTER BEVERAGE CORP 50.81 28,851 40.98 3,105.64 726.79
FIZZ
MNST CCE COCA-COLA EUROPEAN PARTNER 41.87 20,232 27.37 10,668.41 670.57
UN

AKO.B
AKO.A COT COTT CORP QUE 14.46 2,009 NM 3,433.90 -110.90
FA

KOF
VO
-10%

KO COCA-COLA CO 44.43 189,830 31.07 40,699.00 6,226.00

RA

PEP DPS
B
LE

DPS DR PEPPER SNAPPLE GROUP INC 89.45 16,442 19.70 6,463.00 842.00
-6% KO 6%
COKE COCA-COLA BTLNG CONS 229.84 1,641 38.96 3,396.67 55.14
Earnings Yield (TTM)
The peer group comparison is based on Major Soft Drinks companies of comparable size.
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -7.2% and
54.7%. Companies with NA or NM values do not
appear.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 2
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: PEP

PEPSICO INC
Sector: Consumer Non-Discretionary Soft Drinks Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
$3.22 2.82% 0.69 $162.5 Billion $98.50-$118.24 $114.02

COMPANY DESCRIPTION STOCK-AT-A-GLANCE

PepsiCo, Inc. operates as a food and beverage company Below is a summary of the major fundamental and technical factors we consider when determining our
worldwide. Its Frito-Lay North America segment offers overall recommendation of PEP shares. It is provided in order to give you a deeper understanding of our
Lay's and Ruffles potato chips; Doritos, Tostitos, and rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
Santitas tortilla chips; and Cheetos cheese-flavored important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
snacks, branded dips, and Fritos corn chips. The understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
company's Quaker Foods North America segment valuation. Please refer to our Valuation section on page 5 for further information.
provides Quaker oatmeal, grits, rice cakes, granola, and
oat squares; and Aunt Jemima mixes and syrups, Quaker FACTOR SCORE
Chewy granola bars, Cap'n Crunch cereal, Life cereal,
and Rice-A-Roni side dishes. Its North America Growth out of 5 stars 4.5
Beverages segment offers beverage concentrates, Measures the growth of both the company's income statement and weak strong
fountain syrups, and finished goods under the Pepsi, cash flow. On this factor, PEP has a growth score better than 80% of the
Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Diet stocks we rate.
Mountain Dew, Tropicana Pure Premium, Mist Twst, and
Mug brands; and ready-to-drink tea and coffee, and
juices. The company's Latin America segment provides
Total Return out of 5 stars 4.0
snack foods under the Doritos, Cheetos, Marias Gamesa, Measures the historical price movement of the stock. The stock weak strong
Ruffles, Emperador, Saladitas, Sabritas, Lay's, performance of this company has beaten 70% of the companies we
Rosquinhas Mabel, and Tostitos brands; cereals and cover.
snacks under the Quaker brand; and beverage
concentrates, fountain syrups, and finished goods under Efficiency out of 5 stars 5.0
the Pepsi, 7UP, Gatorade, Toddy, Mirinda, Manzanita Measures the strength and historic growth of a company's return on weak strong
Sol, H2oh!, and Diet Pepsi brands. Its Europe invested capital. The company has generated more income per dollar of
Sub-Saharan Africa segment offers snack foods under capital than 90% of the companies we review.
the Lay's, Walkers, Doritos, Cheetos, and Ruffles brands;
cereals and snacks under the Quaker brand; beverage
concentrates, fountain syrups, and finished goods under
Price volatility out of 5 stars 5.0
the Pepsi, 7UP, Pepsi Max, Mirinda, Diet Pepsi, and Measures the volatility of the company's stock price historically. The weak strong
Tropicana brands; ready-to-drink tea products; and dairy stock is less volatile than 90% of the stocks we monitor.
products under the Chudo, Agusha, and Domik v Derevne
brands. The company's Asia, Middle East and North Solvency out of 5 stars 5.0
Africa segment provides snack foods under the Lay's, Measures the solvency of the company based on several ratios. The weak strong
Kurkure, Chipsy, Doritos, Cheetos, and Crunchy brands; company is more solvent than 90% of the companies we analyze.
cereals and snacks under the Quaker brand; beverage
concentrates, fountain syrups, and finished goods under Income out of 5 stars 4.5
the Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina, and
Measures dividend yield and payouts to shareholders. The company's weak strong
Tropicana brands; and tea products. The company was
dividend is higher than 80% of the companies we track.
founded in 1898 and is headquartered in Purchase, New
York.
THESTREET RATINGS RESEARCH METHODOLOGY
PEPSICO INC
700 Anderson Hill Road TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
Purchase, NY 10577 price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
USA perform against a general benchmark of the equities market and interest rates. While our model is
Phone: 914-253-2000 quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
http://www.pepsico.com expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.

Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 3
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: PEP

PEPSICO INC
Sector: Consumer Non-Discretionary Soft Drinks Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
$3.22 2.82% 0.69 $162.5 Billion $98.50-$118.24 $114.02

Consensus EPS Estimates² ($) FINANCIAL ANALYSIS

IBES consensus estimates are provided by Thomson Financial
PEPSICO INC's gross profit margin for the second quarter of its fiscal year 2017 is essentially unchanged
when compared to the same period a year ago. The company has grown sales and net income during the
past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the
growth of the average competitor within its industry. PEPSICO INC has average liquidity. Currently, the Quick
Ratio is 1.12 which shows that technically this company has the ability to cover short-term cash needs. The
company's liquidity has decreased from the same period last year, indicating deteriorating cash flow.

At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by
1.43 5.16 E 5.57 E 1.27% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively
Q3 FY17 2017(E) 2018(E) unlikely that the company will face financial difficulties in the near future.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
INCOME STATEMENT next 12-months. To learn more visit www.TheStreetRatings.com.
Q2 FY17 Q2 FY16
Net Sales ($mil) 15,710.00 15,395.00
EBITDA ($mil) 3,578.00 3,573.00
EBIT ($mil) 3,024.00 3,010.00
Net Income ($mil) 2,105.00 2,005.00

BALANCE SHEET
Q2 FY17 Q2 FY16
Cash & Equiv. ($mil) 17,160.00 13,379.00
Total Assets ($mil) 76,943.00 72,711.00
Total Debt ($mil) 39,484.00 35,621.00
Equity ($mil) 12,404.00 12,248.00

PROFITABILITY
Q2 FY17 Q2 FY16
Gross Profit Margin 58.51% 59.18%
EBITDA Margin 22.77% 23.20%
Operating Margin 19.25% 19.55%
Sales Turnover 0.82 0.86
Return on Assets 8.85% 7.13%
Return on Equity 54.92% 42.34%

DEBT
Q2 FY17 Q2 FY16
Current Ratio 1.32 1.40
Debt/Capital 0.76 0.74
Interest Expense 265.00 255.00
Interest Coverage 11.41 11.80

SHARE DATA
Q2 FY17 Q2 FY16
Shares outstanding (mil) 1,426 1,441
Div / share 0.81 0.75
EPS 1.46 1.38
Book value / share 8.70 8.50
Institutional Own % NA NA
Avg Daily Volume 3,511,733 4,024,890
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 4
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: PEP

PEPSICO INC
Sector: Consumer Non-Discretionary Soft Drinks Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
$3.22 2.82% 0.69 $162.5 Billion $98.50-$118.24 $114.02

RATINGS HISTORY VALUATION

Our rating for PEPSICO INC has not changed since BUY. The current P/E ratio indicates a significant discount compared to an average of 38.88 for the
5/14/2003. As of 7/13/2017, the stock was trading at Beverages industry and a value on par with the S&P 500 average of 24.41. For additional comparison, its
a price of $114.02 which is 3.6% below its 52-week price-to-book ratio of 13.11 indicates a significant premium versus the S&P 500 average of 3.04 and a
high of $118.24 and 15.8% above its 52-week low of significant premium versus the industry average of 8.13. The price-to-sales ratio is above the S&P 500
$98.50. average, but well below the industry average. The valuation analysis reveals that, PEPSICO INC seems to be
trading at a discount to investment alternatives within the industry.
2 Year Chart
$120
BUY: $97.22

Price/Earnings 1 2 3 4 5 Price/CashFlow 1 2 3 4 5
premium discount premium discount
$110 PEP 24.21 Peers 38.88 PEP 16.69 Peers 20.53
• Discount. A lower P/E ratio than its peers can • Discount. The P/CF ratio, a stock’s price divided by
$100 signify a less expensive stock or lower growth the company's cash flow from operations, is useful
expectations. for comparing companies with different capital
• PEP is trading at a significant discount to its peers. requirements or financing structures.
2015 2016 • PEP is trading at a discount to its peers.

Price/Projected Earnings 1 2 3 4 5 Price to Earnings/Growth 1 2 3 4 5

premium discount premium discount
MOST RECENT RATINGS CHANGES PEP 20.49 Peers 24.31 PEP 1.33 Peers 1.47
Date Price Action From To • Average. An average price-to-projected earnings • Average. The PEG ratio is the stock’s P/E divided by
7/13/15 $97.22 No Change Buy Buy ratio can signify an industry neutral stock price and the consensus estimate of long-term earnings
Price reflects the closing price as of the date listed, if available average future growth expectations. growth. Faster growth can justify higher price
• PEP is trading at a valuation on par with its peers. multiples.
• PEP trades at a valuation on par to its peers.
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS Price/Book 1 2 3 4 5 Earnings Growth 1 2 3 4 5
(as of 7/13/2017) premium discount lower higher
PEP 13.11 Peers 8.13 PEP 32.67 Peers 3.22
43.81% Buy - We believe that this stock has the • Premium. A higher price-to-book ratio makes a • Higher. Elevated earnings growth rates can lead to
opportunity to appreciate and produce a total return of stock less attractive to investors seeking stocks capital appreciation and justify higher
more than 10% over the next 12 months. with lower market values per dollar of equity on the price-to-earnings ratios.
balance sheet. • PEP is expected to have an earnings growth rate
30.69% Hold - We do not believe this stock offers • PEP is trading at a significant premium to its peers. that significantly exceeds its peers.
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total Price/Sales 1 2 3 4 5 Sales Growth 1 2 3 4 5
return is roughly in balance with the risk of loss. premium discount lower higher
PEP 2.57 Peers 4.42 PEP 1.81 Peers 8.70
25.50% Sell - We believe that this stock is likely to • Discount. In the absence of P/E and P/B multiples, • Lower. A sales growth rate that trails the industry
decline by more than 10% over the next 12 months, with the price-to-sales ratio can display the value implies that a company is losing market share.
the risk involved too great to compensate for any investors are placing on each dollar of sales. • PEP significantly trails its peers on the basis of
possible returns. • PEP is trading at a significant discount to its sales growth
industry on this measurement.
TheStreet Ratings DISCLAIMER:
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New York, NY 10005 The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
www.thestreet.com TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
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This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 5
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.