Morgan Stanley Initiates PEP Coverage With An Overweight Rating

Morgan Stanley is initiating coverage of PepsiCo, Inc. PEP at OW, and has added the beverage manufacturer to Morgan Stanley's Best Ideas list. “We believe this is a compelling entry point into Pepsi, as near-term concern around potential below-consensus 2011 guidance has driven 24% underperformance in Pepsi vs. Coke since 2Q, and has created very attractive valuation in light of longer-term positives,” Morgan Stanley writes. “Pepsi's NTM P/E of 14.2x is two standard deviations below its five-year relative average vs. Coke, and our 7.5% long-term PEP profit growth forecast is well above the 4% we estimate the market is pricing into valuation.” PepsiCo closed Tuesday at $65.41.