Pepsi Performance Continues To Meet Or Exceed Expectations

In the wake of PepsiCo, Inc. (NYSE: PEP)'s estimate-beating earnings report, BMO Capital Markets analyst Amit Sharma maintains an Outperform rating and raised the firm's target from $116 to $120.

Sharma noted PepsiCo has met or beat estimates for their 27th consecutive quarter and is expected to continue the trend.

"We believe that operating performance is poised to continue to exceed/meet expectations," said Sharma, basing the statement on broad-based sales growth (8 percent in emerging markets, 3 percent in developed) and a $1 billion annual cost savings goal.

Related Link: Cramer: PepsiCo Is A Snack Company, Not A Soda Seller

Sharma also noted that PepsiCo reported better-than-expected performance for their Frito-Lay North America (FLNA) and North American Beverage (NAB) segments. PepsiCo identified both as opportunities for further growth and savings.

FLNA has seen favorable consumption trends in its strong snack brands and holds growth potential in its premium brands, which currently account for 10 percent of FLNA sales, according to the analyst.

PepsiCo's NAB segment saw increased profitability in their non-carbonated portfolio, specifically in Gatorade sales growth, according to the analyst. Sharma views increasing the scale other non-carbonated categories as an opportunity to mitigate margin pressure from weakness in PepsiCo's carbonated soft drink category.

At time of publication, PepsiCo was up 1.11 percent on the day at $108.96.

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