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PepsiCo reported solid 3Q19 results on October 3 and said organic revenue growth would 'meet or exceed' its 4% target. We note that management typically issues cautious guidance at the beginning of the year and raises it in later quarters.
PepsiCo is in the last year of a five-year, $5 billion productivity improvement program. In 2019, we expect the company to achieve its goal of $1 billion in annual cost savings and productivity gains.
We see PEP as a well-managed company with a valuable brand portfolio, and one that continues to generate solid growth amid weak demand for many consumer staples.
Our target price of $154, along with the dividend, implies a potential total return of 13% from current levels.
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