--Retire all long term debt at roughly 7 billion?
--Make more acquisitions such as: Smuckers (7 billion), Campbell's Soup (11.75 billion), or Dr. Pepper / Snapple (9 billion)?
A Buyback is good maybe a lesser amount...I would be looking to acquire a healthy company that maybe the market valve isnt so high as some of the stocks just mentioned...Hansons I think would be a good choice,they still have alot of growth going forward. and there in the same business. also what about Jones soda ? that comp. could be picked up dirt cheap..everyone is saying how much they like the cane additives and thats all they do. market the product better..use your distribution and you may have a winner...
Call me a cynical but, IMO nearly all share buy-back programs are really designed to hide the effects of stock options and grants given to employees (usually disproportionately to senior management).
Using the CSCO model, it always looks much better to claim that you did great on a non-GAAP basis (don't assign a costs to the value of all the options given to employees) each quarter because under this method you don't roll in the real labor cost (ie salaries & options costs) just the salary costs. You then pile a boatload of money into buying back shares.
In the end, I'd rather see the funds spent on dividends, or if PEP can identify IRR that are substantially higher than the costs of their capital, then invest the funds back into the business.
Best of Luck...
well that's why that stock hasn't moved in over a decade. SYY coincidentally, is a serial abuser of ESOP grants.
Divi's are great, and keep LT investors like myself fat and happy.
My uncle has a cost basis in some blue chip stocks at close to zero due to all the reinvested dividends, so I know what I'm talking about.
If acquisitions are a better investment you acquire. Obviously, there is no interest or the price is not palatable. The bottler deals shows that they are always on the look out for accretive, good fits. Smuckers???? DrPepper Snapple would be a no go. Deal would never fly with FTC.
IMHO a food company or snack food company is a marriage made in heaven for pep. I drink nothing but Pepsi, I am especially partial to Wild cherry and lime. I always sit down with a nice cold one and a pack of crackers or something. Snack and soda is a natural. Pep is plenty busy in the research and developement of healthier soda's and products as you know from reading all the reports; how could you miss them. So it would not be a stretch for Pep to buy a health food company or similiar purchase. I think it would propel pepsi's image of a company determined to bring the public a healthier product and couldn't hurt its image going into a future where health is going to be pushed hard, especially in the developing countries.
those are horrible ideas.
Holding debt, especially post tax consideration for a company like Pepsico is below the cost of capital.
the shares have a current earnings yield of nearly 8%, so this is a no-brainer, not to mention the added capture of not paying 1.92 in dividends.
Those companies you mentioned, are all second rate, esp. DPS, where 7-up is in decline and they have no international strategy. Smuckers and Campbells are a terrible fit, not to mention provide no synergies.
This is another good move.
The buybacks will be diluted with insider sells.
If PEP increased the Div to a larger payout amount then maybe that would be good but to just buy back shares at high prices so insiders can bail at better prices doesn't do me, as a shareholder, any favors.
At least with the divs I can decide at what price to pay. Instead you are at the mercy of the company which has a vested interest in popping the stock so they can bail at higher prices.
Let's see how much the float gets reduced.
Smuckers is a slow growth business long term.
Snapple. PEP could not buy Dr Pepper/
Snapple due to anti-trust.
Campbell's soup is slow growth.
Food companies are ingongruent with PEP.
You don't understand that PEP's greatest growth is outside the US and the $15B buyback signals that growth ahead because PEP views its own stock as the very best place to put its excess cash flows.
The real concern would be if PEP borrowed to buyback stock ala GE...... they are not and therefore shareholders will benefit from higher stock price.
PEP is making the right move for PEP.