Stifel Raises Price Target On PepsiCo

Stifel raised its price target on PepsiCo, Inc. PEP from $105 to $107 and maintained a Buy rating Friday.

Analyst Mark Swartzberg saw a “higher probability of Trian gaining a board seat between now and May” and viewed “increased Trian influence as a positive to PEP’s multiple. With Mr Peltz's record of getting board sets he seeks, and additional facts in support of his opportunity and interest, we raise the probability from 25 percent to 75 percent.”

Swartzberg updated and trimmed “estimates for FX moves, which resulted in a ~3.9 percent FX headwind vs. 2.8 percent previously, taking [the] 2015E EPS from $4.92 to $4.90.”

Swartzberg added that between “June 30 and September 30, 2014, Trian increased its PepsiCo stake approximately $400 mil to $1.6 billion, in a total estimated fund of $8.5 billion.”

News of the increased stake “came shortly after a series of publicized meetings with over 100 institutional owners of PepsiCo shares. [Stifel analysts] participated in a portion of those meetings...and continue to believe Trian’s goal is to be in the board room dialogue and that owners widely support that, regardless of their thinking on splitup.”

The 12-month target of $107 per share was based on 25 percent “of estimated $104 per share ‘business as usual’ value, or 19.5x 2016E EPS of $5.32, 75 percent of estimated $108 per share ‘Trian-seat value,’” the note concluded.

PepsiCo, Inc. recently traded at $96.76, down 0.74 percent.