UPDATE 1-UBS: PepsiCo shares offer best buying chance in 7 yrs

martedì 2 giugno 2009 17:26

June 2 (Reuters) - UBS named PepsiCo (PEP.N: Quotazione) as its top pick in its U.S. staples coverage, and said the company's stock offers the best buying opportunity in the last seven years.

"PepsiCo remains a strong global franchise with improving topline trends in most businesses, substantial cost and productivity savings, declining input costs and the benefits of a pending deal with its bottlers," analyst Kaumil Gajrawala said.

The stock has lagged its peers and the market since March 1, which is "unwarranted" as PepsiCo will likely post double-digit earnings growth over the next three years, said the analyst, who raised his price target on the stock by $2 to $62.

Gajrawala, who kept a "buy" rating on the stock, said while PepsiCo's proposed deal with its bottlers would generate total cost savings of $400 million to $600 million, the deal could also support "multiple years of topline upside" for the company.

"The true benefits from the deal will be topline synergies as this new model should remove complexity from decisions and drive better portfolio management of the U.S. beverage business," the analyst said.

On April 20, PepsiCo had offered $6 billion to buy the remaining stakes in Pepsi Bottling PBG.N and PepsiAmericas but was rejected, as its largest bottlers thought the offer was undervalued.

PepsiCo's shares were up $2.33 at $55.46 Tuesday morning on the New York Stock Exchange. (Reporting by Mihir Dalal in Bangalore; Editing by Deepak Kannan)