I'm Susan Jabinsky, co-host of the Morning Filter podcast. The holidays are upon us. Why not spread some holiday cheer by gifting a stock to a close family member or friend.Or how about giving them some money they can invest themselves along with a good stock tip or two from Morning Star. Today, we're talking about three stocks we think would make good holiday gifts as long-term investments. All of these stocks are from companies with wide economic moes.We expect companies with wide moes to remain competiti ...

PepsiCo is disappointing investors this year, but it offers dividend dependability and rebound potential if an activist investor can work some magic.For all the talk about the wind possibly coming out of the sails of the artificial intelligence (AI) trade, a real sector rotation hasn't played out.Recent headlines suggest investors are skittish about what the near term holds for growth and technology stocks. Such jitters often compel market participants to move into defensive sectors, but broadly speaking, c ...

Core Insights - PepsiCo, Inc. (NASDAQ:PEP) has been recognized as one of the 15 Best DRIP Stocks to Own Right Now, highlighting its attractiveness for dividend reinvestment strategies [1] - DZ Bank upgraded PepsiCo from Hold to Buy, setting a price target of $167, reflecting confidence in the company's future performance [2] - The company reported a strong third-quarter revenue of $23.9 billion, representing a 2.7% year-over-year increase and exceeding analyst expectations by approximately $90 million [3] Financial Performance - PepsiCo's third-quarter revenue reached $23.9 billion, marking a 2.7% increase compared to the previous year [3] - The company anticipates low single-digit growth in organic revenue looking ahead to 2025 [3] - PepsiCo plans to return about $8.6 billion to shareholders, which includes $7.6 billion in dividends and $1 billion in share repurchases [3] Dividend Stability - PepsiCo has increased its dividend for 53 consecutive years, demonstrating a strong commitment to returning value to shareholders [4] - The company operates as a global leader in the food and beverage industry, with a diverse portfolio of well-known brands such as Pepsi-Cola, Lay's, and Gatorade [4]

Core Insights - Coca-Cola's Zero Sugar line has transformed into a key growth driver for the company, significantly enhancing consumer engagement and reshaping its sparkling beverage strategy [1][3][8] - The brand has shown strong growth in markets like Brazil, Mexico, and North America, allowing Coca-Cola to gain value share despite macroeconomic challenges [1][3] - The success of Zero Sugar reflects Coca-Cola's ability to adapt to consumer preferences for healthier options while maintaining its brand identity [1][3][8] Innovation and Marketing Strategy - Coca-Cola is launching new flavors and utilizing digital engagement to connect with younger consumers who prioritize taste and health [2] - The revitalization of Diet Coke through nostalgic flavors and creative campaigns complements the growth of Coke Zero Sugar, enhancing the "light and zero" portfolio [2] - The combined strength of Coke Zero Sugar and Diet Coke is expanding the sparkling category rather than creating internal competition [2] Financial Performance - Coca-Cola's shares have increased by 9.2% year to date, outperforming the industry growth of 4.4% [7] - The company is trading at a forward price-to-earnings ratio of 21.35X, which is higher than the industry's 17.77X [9] - The Zacks Consensus Estimate indicates year-over-year earnings growth of 3.5% for 2025 and 8% for 2026, with estimates remaining unchanged over the past week [10] Earnings Estimates - Current earnings estimates for the fourth quarter of 2025 stand at $0.56 per share, with projections for the next quarter at $0.82 [11] - For the full year of 2025, earnings are expected to be $2.98, increasing to $3.22 in 2026 [11]

Core Insights - Dividend growth is a significant advantage in the stock market, with companies that increase payouts at a healthy rate typically outperforming the S&P 500 due to the correlation with rising earnings [1][9] Company Analysis: PepsiCo - PepsiCo generated $24 billion in revenue in Q3 2025, with a quarterly dividend of $1.42 per share, resulting in a 3.75% annual yield [4] - Despite a concerning 105% payout ratio, PepsiCo's strong cash flow and resilient business model support its dividend payments [5] - The company is reshaping its portfolio in response to declining soda trends, highlighted by the $1.95 billion acquisition of Poppi, which has seen over 50% growth in retail sales year-to-date [6] - PepsiCo launched its own Pepsi Prebiotic Cola and is enhancing functional benefits in its product lines, expecting to return to long-term growth next year [7] - The stock trades at 17.8 times forward earnings estimates, presenting a bargain compared to the S&P 500's nearly 29 times earnings, with an average dividend growth of 7% over the past five years [8]

Core Viewpoint - PepsiCo, Inc. is a leading player in the global beverages and convenient foods market, demonstrating strong revenue growth and resilience despite economic challenges [2][5]. Company Profile - PepsiCo boasts a diverse portfolio with well-known brands such as Pepsi, Gatorade, Lay's, and Quaker, supported by a vast distribution network [2]. - The company maintains strong pricing power and continues to innovate, expand internationally, and focus on premiumization [2]. - Challenges include inflationary pressures and shifting consumer preferences, but PepsiCo's scale and brand loyalty help sustain cash flow and shareholder returns [2]. DCF Analysis - Discount Rate: 10% - Terminal Growth Rate: 3% - WACC: 10% - Forecasted Free Cash Flows (in billions USD): - 2025: $7.5B → PV: $6.82B - 2026: $7.9B → PV: $6.56B - 2027: $8.3B → PV: $6.30B - 2028: $8.7B → PV: $6.06B - 2029: $9.1B → PV: $5.82B - Total Present Value of FCFs = $31.56B [3]. - Terminal Value Calculation using perpetuity growth model: - TV = (9.1 × 1.03) ÷ (0.10 − 0.03) = $134.0B - Present Value of Terminal Value = $83.89B [3]. Enterprise Value - Enterprise Value = Total Present Value of FCFs + Present Value of Terminal Value = $31.56B + $83.89B = $115.45B [3]. - Net Debt: - Cash: $9.27B - Total Debt: $44.95B - Net Debt = $35.68B [4]. - Equity Value: - Equity Value = Enterprise Value - Net Debt = $115.45B - $35.68B = $79.77B [4]. - Shares Outstanding: ~1.37B - Intrinsic Value per Share = $58 [4]. Conclusion - PepsiCo is characterized as a strong consumer-staples franchise with predictable cash flows and a competitive advantage [5]. - The stock appears to be trading above its intrinsic valuation, suggesting that the market is pricing in expectations for sustained growth and margin expansion [5]. - For value investors, PepsiCo may be viewed as a quality compounder rather than a deep value buy [5][6].

Core Insights - PepsiCo launched its first-ever Global Farmer Awards to honor outstanding farmers, farming families, and advisors from its global supply chain, emphasizing the importance of agriculture in its business model [1][3][4] - The Perry Family Farm from Alberta, Canada, was awarded Farmer of the Year, recognized for its leadership in regenerative agriculture and long-standing partnership with PepsiCo [2][5] - The awards align with PepsiCo's pep+ Positive Agriculture agenda, which aims to implement regenerative practices across 10 million acres by 2030, having already achieved over 3.5 million acres as of 2024 [6] Event Highlights - The awards ceremony took place at PepsiCo's headquarters in Purchase, NY, gathering nearly 60 farmers and advisors from 19 countries [1][3] - Finalists were recognized across six categories: Sustainability, Next-Gen Farming, Leadership & Advisory, Heritage & Growth, Quality, and Farmer of the Year, showcasing a diverse representation of farmers [4] - The event included a broader agenda with plenary sessions, a Taste & Tell Expo, and panels where farmers shared regenerative practices with PepsiCo executives [9][10] Strategic Initiatives - PepsiCo is investing in farmer training, technology, and collaborations to enhance soil health, biodiversity, and watershed improvements [6][7] - The Climate Resilience Platform was launched as a digital tool to provide farmers with insights on climate conditions and potential impacts on yields [7] - The STEP Up for Agriculture initiative, developed in collaboration with Unilever and other retailers, aims to strengthen farmer support organizations and promote regenerative practices [7]

Core Viewpoint - PepsiCo is positioned as a contrarian investment opportunity amidst a market dominated by AI growth stocks, with potential for significant gains for patient investors [1] Financial Performance - In Q3 fiscal 2025, PepsiCo reported a 1.3% increase in organic revenue and a 2% decline in core constant-currency earnings per share (EPS) [2] - The company reaffirmed its 2025 financial guidance, projecting low single-digit organic revenue growth and flat core constant-currency EPS compared to fiscal 2024 [2] Strategic Initiatives - PepsiCo is implementing cost-cutting measures through labor reductions and productivity improvements, which are expected to continue into the next fiscal year [2] - The company is engaging with Elliott Investment Management, which holds a $4 billion stake, to explore opportunities for shareholder value creation [4] Market Position and Competitive Landscape - PepsiCo's vertically integrated bottling system differs significantly from Coca-Cola's model, which relies on a network of around 200 bottling partners, allowing for more agility in responding to market changes [6] - Elliott's report highlighted PepsiCo's strong international brand portfolio but criticized its execution and operational strategies, suggesting a refranchised bottler network [5] Consumer Trends and Product Strategy - Management emphasized a shift towards health-conscious products, responding to consumer demands for clean labels and healthier options [8] - Recent acquisitions, including Sabra, Obela, Siete Foods, and Poppi, reflect the company's commitment to healthier snack options and mini-meals [9] Investment Potential - Despite recent poor quarterly results, the long-term investment thesis for PepsiCo is strengthening, with a forward price-to-earnings ratio of 18 and a dividend yield of 4.1% [10] - The company has a history of increasing dividends for 53 consecutive years, establishing itself as a reliable source of passive income [10] - Analysts believe PepsiCo can outperform the S&P 500 by achieving earnings growth of 5% or more, with its dividend contributing significantly to total returns [11][12]

Core Insights - PepsiCo's shares increased as investors reacted positively to its product refreshes and wellness innovations, alongside plans for consistent growth in snacks and beverages [1] Financial Performance - The company reported third-quarter adjusted earnings per share of $2.29, surpassing the analyst consensus estimate of $2.26 [1] - Quarterly sales reached $23.937 billion, reflecting a 2.6% year-over-year increase, exceeding expectations of $23.827 billion [1] Analyst Commentary - Bank of America Securities analyst Peter T. Galbo maintained a Neutral rating on PepsiCo, raising the price target from $150 to $155 [2] - The analyst adjusted the fiscal year 2025 EPS estimate to $8.12 from $8.04, citing a softer foreign exchange impact [2] - Near-term share performance is expected to depend on improvements in North America organic sales with upcoming product launches [2] Sales and Product Strategy - Sales in the PepsiCo Foods North America (PFNA) segment, including Siete, remained flat year-over-year, despite challenges in salty snacks [3] - The company aims for sequential organic growth through restaging of Lay's and Tostitos, focusing on health and wellness innovations across various brands [3] Volume and Growth Projections - Underlying volumes in the PepsiCo Beverages North America (PBNA) segment fell by 1% year-over-year, excluding a 300 basis points drag from exiting case-pack water [4] - The analyst updated the fiscal year 2026 quarterly organic growth projections to +2.1%, +2.4%, +3.6%, and +3.9%, indicating sequential improvement [4] Long-term Outlook - EPS estimates for fiscal years 2026 and 2027 were increased to $8.60 and $9.10, respectively [5] - The company is viewed as defensive amid a potential U.S. economic slowdown, with a balanced approach to growth, dividends, and buybacks [5] - PepsiCo shares were reported to be up 3.61% at $149.94 at the time of publication [5]

Core Insights - PepsiCo's shares increased as investors reacted positively to its product refreshes and wellness innovations, alongside plans for consistent growth in snacks and beverages [1] Financial Performance - The company reported third-quarter adjusted earnings per share of $2.29, surpassing the analyst consensus estimate of $2.26 [1] - Quarterly sales reached $23.937 billion, reflecting a 2.6% year-over-year increase, exceeding expectations of $23.827 billion [1] Analyst Commentary - Bank of America Securities analyst Peter T. Galbo maintained a Neutral rating on PepsiCo, raising the price target from $150 to $155 [2] - The analyst adjusted the fiscal year 2025 EPS estimate to $8.12 from $8.04, citing a softer foreign exchange impact [2] - Near-term share performance is expected to depend on improvements in North America organic sales with upcoming product launches [2] Sales and Product Strategy - Sales in the PepsiCo Foods North America (PFNA) segment, including Siete, remained flat year-over-year, despite challenges in salty snacks [3] - The company aims for sequential organic growth through restaging of Lay's and Tostitos, focusing on health and wellness innovations across various brands [3] Volume and Growth Projections - Underlying volumes in the PepsiCo Beverages North America (PBNA) segment fell by 1% year-over-year, excluding a 300 basis points drag from exiting case-pack water [4] - Management plans to reaccelerate growth with new formulations for Muscle Milk and innovations across Gatorade, Pepsi, and Mountain Dew [4] - The analyst updated the fiscal year 2026 quarterly organic growth projections to +2.1%, +2.4%, +3.6%, and +3.9%, indicating sequential improvement [4] Long-term Outlook - EPS estimates for fiscal years 2026 and 2027 were increased to $8.60 and $9.10, respectively [5] - The company is viewed as defensive amid a potential U.S. economic slowdown, with a balanced approach to growth, dividends, and buybacks [5] - PepsiCo shares rose by 3.61% to $149.94 at the time of publication [5]