Goldman Sachs Gives Company Update On PepsiCo

PepsiCo PEP shares are up less than 1% year-to-date, underperforming the S&P 500 Index by 600bps. Goldman reiterates its Buy rating on PEP and expect 10% EPS growth plus a point of P/E expansion to drive around 20% upside in the shares in 12 months as it believes: 2011 consensus estimates are achievable; US beverage trends should improve as PEP steps up focus behind core brands; and valuation is too compelling to ignore. Goldman is trimming its estimates by 1c in 2011/2012 to $4.54/$5.02 to reflect more marketing investment in NA beverages partially offset by higher currency. Goldman's estimates are still modestly above consensus for both years. Catalysts include: In line quarterly results, with no reduction to FY2011 guidance; Gradual improvement in US beverage trends in monthly scanner data; Acceleration to 13-14% EPS growth in 2Q11. Goldman Sachs has a $77 PT and Buy rating on PEP PEP closed Thursday at $65.92