Pepsi Bottling Shakes It Up

Pepsi Bottling Group, Inc. (PBG) continues to execute well in a difficult soft drink environment. The lackluster carbonated soft drink (CSD) environment in North America is being addressed with a robust pipeline of new products and new initiatives in the refreshment and hydration categories.

Pepsi Bottling Group’s management is highly motivated and focused on the efficient manufacture and distribution of Pepsi-Cola products. The company is expanding in higher growth geographies. Net revenue per case in the U.S. has been strong, growing in the mid single-digit range due to a positive pricing environment. With the stock trading in the low-end of the historical valuation range, the Buy rating is maintained.

Pepsi Bottling Group’s stock has traded in a wide P/E multiple range of 12 to 27 over the last five years. However, during times of low single-digit volume growth, the P/E range has been between 12 and 19. At the current P/E of 14.2, the stock is attractive, despite near-term weakness in North America. Significant upside potential in Pepsi Bottling Group s stock is expected when CSD volumes strengthen. The target price is based on a 15 P/E on trailing 12 month earnings; therefore, the target price is $34.25.

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