Citigroup Keeps 'Buy' on Pepsi

Analyst Bonnie Herzog expects continued superior returns for the soft-drink manufacturer

Citigroup reiterates its buy rating on PepsiCo (PEP ).

Analyst Bonnie Herzog says the 62 cents third-quarter earnings per share met her estimate and the consensus estimate. She expects continued superior returns on a combination of strong brand franchises, a powerful distribution system, and successful innovation capabilities.

Herzog notes management has guided to $2.19 2003 earnings per share -- including a 2 cents charge for the cost of a merger -- at the top of its estimated range. She's pleased with Frito-Lay North America's strong quarter, espescially given the stagnant economy.

Herzog says Pepsi Beverages North America also is strong, and that PepsiCo International growth is robust. She thinks the market doesn't appreciate the value of the Frito-Lay business. Herzog sees 57 cents fourth-quarter earnings per share, and $2.48 for 2004. She has a $55 target.

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