Activist Investor Nelson Peltz Pursues PepsiCo

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Activist investor Nelson Peltz said Thursday that he might engage PepsiCo's board in a proxy fight in an effort to unlock value.

Peltz argued at a conference where he was speaking thatPepsiCo 's ( PEP ) shares have advanced not because of earnings growth but because other investors see the value that could be unlocked in a reorganization. Earlier, Peltz said that he has met with 100 of the company's biggest shareholders.

PepsiCo's earnings are due July 23 before the market opens. Analysts are forecasting EPS of $1.23 a share, a 6% decline from the year-earlier period. In the last quarterly report, PepsiCo's EPS showed an 8% increase and easily beat estimates of 75 cents.

Despite Peltz's dissatisfaction with PepsiCo's management, Wall Street generally likes the stock. Last month, Jefferies analyst Kevin Grundy started coverage with a buy rating and a price target of 102. The stock is currently trading near 90 and was near 88 when Grundy made the call.

"Nascent signs of improvement in (PepsiCo's) beverage business are encouraging and should improve sentiment for what has long been an underperforming asset," Grundy said in a report. "Activist involvement, if nothing else, should elevate management's game and drive better execution. FY 14 guidance has plenty of room for upside, leaving us positive on both the near-term and long-term setup for the stock."

He rated rivalCoca-Cola ( KO ) a hold.

PepsiCo's stock has been outperforming Coke 8.5% to 1.7% year to date.

PepsiCo has been steadily raising its dividend. It's now 65.5 cents a share, which works out of an annual yield of 2.9%.

In 2000, the dividend was 14 cents a share.

Analysts expect PepsiCo earnings to grow 4% this year and 8% in 2015. It has a five-year Earnings Stability Factor of 3 on a 0-to-99 scale where low numbers correspond to steady earnings growth.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: PEP , KO

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