Morgan Stanley Reiterates Its Overweight Rating On PepsiCo Following Management Meetings

Morgan Stanley is reiterating its Overweight rating on PepsiCo PEP after bullish management meetings, which reinforced its belief that there is high EPS visibility that Pepsi can at least meet (or beat) 2011 EPS guidance. Given recent negative EPS revisions and attractive valuation, Morgan Stanley believes this will drive outperformance in the stock. PEP remains the top pick and is on Morgan Stanley's Best Ideas List. Key Takeaways from the meeting include: first, PEP believes it has solid visibility that it can hit its FY11 guidance, which Morgan Stanley views as a positive given recent negative macro issues, and meeting/ beating guidance would be a turnaround from recent negative EPS revisions. In addition, PEP addressed two areas of recent investor concern, including: PEP downplayed the potential for large-scale acquisitions, and investment in nutrition will be measured and is unlikely to be significantly dilutive to EPS beyond 2011. Morgan Stanley has an $82 PT on PEP PEP closed Friday at $63.24