1 / 16

PepsiCo

PepsiCo . By: Derek Johnson Max Hand John Ridge Eduardo Sanchez Blake Wathen. Background. Created in 1902 and incorporated in 1919 Merged with Frito-Lay in 2001. #2 seller of carbonated soft drinks #1 seller of snack in the United States. Sales Projection. Regression?

shalom
Download Presentation

PepsiCo

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. PepsiCo By: Derek Johnson Max Hand John Ridge Eduardo Sanchez Blake Wathen

  2. Background Created in 1902 and incorporated in 1919 Merged with Frito-Lay in 2001. #2 seller of carbonated soft drinks #1 seller of snack in the United States

  3. Sales Projection • Regression? • US GDP, US disposable income, # of households • No good match • R squared .39 • P-value .05 • X-Variable -5 • Why is everything off?

  4. Reason Against Regression • PepsiCo’s Acquisitions • Tropicana, 1998 • Quaker Oats 2001 • Divestment • PepsiCo spun off PepsiCo Bottling Company, 1999 • September 11th, 2001 terrorist attacks • Economic slowdown • 27% real sales growth that year

  5. Time Series Analysis Set 1998 at t=0, 1999 t=1, all the way to 2008 as t=10 Ran regression “t” as “x” value, real sales as “y” value R squared .77 P-value .00004

  6. Result • Final formula (#’s in millions) • Y = 28424 + 1199.97 * x • 2009 as t=11, 2010 t =12, all the way to 2019 t=21 • Much better projection of real sales

  7. The Pro-Forma Income Statement

  8. Projecting the Income Statement • Revenues: Time Series Analysis • Cost of Goods Sold and SG&A • Used a % of Sales approach: 75.22% • Regression resulted in similar result • Depreciation Expense • Change in Accumulated Depreciation minus projected Assets Retired

  9. Projecting the Income Statement (cont.) • Interest Income and Interest Expense • Historical average of Interest Income/Cash and ST Investments • Historical average of Interest Expense/LT Debt • Income Tax • Assumed an effective tax rate of 35% • Dividends and Retained Earnings • Historical average of Dividends/Net Income: 37.38% • Retained Earnings the remaining 62.62%

  10. Balance Sheet: Assets Cash and Short-Term Investments Accounts Receivable Inventory

  11. Balance Sheet: Assets • Intangibles • Property, Plant, and Equipment • Accumulated Depreciation • Other Assets

  12. Balance Sheet: Liabilites/Equity Accounts Payable Income Tax Payable Long-Term Debt Other Liabilities Common Stock Retained Earnings

  13. WACC Cost Equity: 10.98% Cost Debt: 8.93% Calculated WACC: 8.94% Industry Range: 7%-11%

  14. Intrinsic Value of PepsiCo Free Cash Flow Depreciation Tax Shield

  15. Valuation Analysis Calculated Share Price: $87.03 Observed Share: $46.52 PepsiCo is Undervalued Reasons: Global Strategy Wide Portfolio of National & Local Brands Innovation & Acquisitions

  16. Conclusion Valuation of PepsiCo share price: $87.03 $40 higher than actual PepsiCo share price PepsiCo is undervalued Difference is explained by our assumption that PepsiCo will continue to acquire new companies and grow

More Related