How Sensitive Is The PepsiCo Stock To Its International Snacks Business?

+6.17%
Upside
175
Market
186
Trefis
PEP: PepsiCo logo
PEP
PepsiCo

More than half the revenue for the food and beverage giant PepsiCo (NYSE:PEP) comes from its snack business, and the company derives ~44% of its top line from markets outside the U.S. In this respect, the international snacks and dairy products business becomes crucial to the company. This division formed 27% of the net revenue for the company but only 10% of the net EBITDA due to the lower margin for this division. Last year, revenues from this division declined by over 9%, hurt by volatility in certain emerging markets, especially Russia, and this negative impact trickled down to the margins as well.

However, in the future, things could improve for PepsiCo, which has been affected in the last year or two by the continuously strengthening U.S. dollar, in terms of currency translations. Revenue could grow, and, in turn, profitability could improve. Just to give a sense of how the PepsiCo stock is sensitive to the movement in its international snacks and dairy products division — if the company’s international snacks market share rises to 6.4% by 2021, up from the currently estimated share of 3.8%, and if the margin rises to 8.5%, there could be an upside of nearly 25% to the current PepsiCo price estimate.

Pepsico Q&A 16

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for PepsiCo

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