CELH

Coca Cola’s Pricing Strength Continues to Power Results

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Image: Coca-Cola’s pace of price/mix expansion continues to drive strong performance. By Brian Nelson, CFA On February 13, Coca-Cola (KO) reported strong fourth quarter results that exceeded expectations on both the top and bottom lines. The standout metric in the quarter was organic revenue growth, which advanced an impressive 12% in the quarter thanks to a solid 9 percentage-point increase in price/mix and 3 percentage-point expansion in concentrate sales. The company’s outlook for 2024 was strong as well, with the company targeting organic revenue expansion of 6%-7% for the year, and we like the momentum behind Coca-Cola’s performance. The Dividend King continues to deliver for investors, and while shares are trading above our fair value estimate, investors can do a … Read more

There Will Be Volatility

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By Brian Nelson, CFA Last year, 2022, was a big test for equity investors, and the downside volatility that we witnessed during the year wasn’t comfortable, to say the least. Following the COVID-19 crash and rebound during 2020, and then the market surge in 2021, it wouldn’t be a stretch to say many investors’ heads are probably still spinning from all the volatility witnessed to start this decade. That said, part of what we’ve been warning about the past few years with respect to the equity market, especially in Value Trap, is that the proliferation of price-agnostic trading (e.g. quant, machine/algorithmic trading, etc.) will only lead to more and more market volatility, so while we were somewhat surprised by last … Read more

Positive Pricing Elasticities Continue to Power Pepsi

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Image: Effective net pricing continues to be strong at Pepsi. Image Source: Pepsi By Brian Nelson, CFA  On July 13, PepsiCo, Inc. (PEP) reported excellent second-quarter 2023 results. The firm’s pricing power continues to impress as the executive team manages modest losses in organic volume with huge effective net pricing increases. For the 12 weeks ended June 17, 2023, organic volume dropped 2.5% while effective net pricing increased a whopping 15% (effective net pricing increased 14% in PepsiCo Beverages North America). Operating income surged more than 75% in the quarter. For the 24 weeks ended June 17, 2023, free cash flow of $506 million was 32% higher than the $383 million mark in the same period a year ago. Pepsi … Read more

Fed Winning the Fight Against Inflation, Food-at-Home Prices Easing

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Image: CPI-U, not seasonally adjusted. The 12-month percent change in the pace of inflation for all items has fallen from north of 9% in June 2022 to 5% in March 2023. Image Source: BLS By Brian Nelson, CFA The Bureau of Labor Statistics (BLS) released the Consumer Price Index for All Urban Consumers (CPI-U) on April 12, and it showed that the Fed is winning its fight against inflation. The CPI-U rose just 0.1% in March on a seasonally adjusted basis, down 0.3 percentage points from the increase in February. During the past 12 months, the all-items index has advanced 5.0% before any seasonal adjustments, a level that is still higher than the Fed’s long-term target, but not one indicative of … Read more

General Mills Experiencing Tremendous Pricing Power, Positive Elasticities

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Image Source: Mike Mozart By Brian Nelson, CFA Cereal maker General Mills (GIS) continues to flex its pricing power. The company’s third-quarter results for its fiscal 2023, released March 23, showed a company that is raising prices almost at will and driving tremendous adjusted operating profit expansion, while organic pound volume remains essentially flat. The company continues to optimize its revenue model as it forgoes volume expansion in favor of pricing growth, and we would expect further price increases across its product line-up for some time. With adjusted operating profit surging, price elasticities remain in its favor, much to the detriment of the cash-strapped consumer, which can only expect more food-at-home inflation. Shares of General Mills yield ~2.5% at the … Read more

PepsiCo’s Pricing Actions Fantastic; Needs Better Free Cash Flow in 2023 to Cover 10% Dividend Hike

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Image Source: PepsiCo By Brian Nelson, CFA On February 9, PepsiCo, Inc. (PEP) reported impressive fourth-quarter 2022 results that showed organic revenue growth of 14.6% and core constant-currency earnings-per-share expansion of 10%. The company also added to its long streak of consecutive annual dividend increases, raising the payout by 10%, to $5.06 per share on an annualized basis, starting with the June 2023 payment. PepsiCo has rewarded dividend growth investors with 51 consecutive years of dividend growth, and we have no reason to believe that the streak will be broken anytime soon. The firm expects to buy back $1 billion worth of its shares during 2023. PepsiCo showcased tremendous product pricing power. During the fourth quarter, volumes across its portfolio … Read more

PepsiCo May Be A Rare Winner in This Inflationary Environment

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Image Source: PepsiCo Inc – Third Quarter of Fiscal 2022 Earnings Press Release By Callum Turcan On October 12, PepsiCo Inc (PEP) reported third quarter earnings for fiscal 2022 (period ended September 12, 2022) that beat both consensus top- and bottom-line estimates, primarily due to the enormous price increases the consumer staples giant pushed through. The company also raised its full-year guidance for fiscal 2022 in conjunction with its latest earnings report, which sent shares of PepsiCo sharply higher during the following trading days. We assign PepsiCo a fair value estimate of $164 per share and the upper end of our fair value estimate range stands at $197 per share. With shares trading at ~$173 each, we think the company’s … Read more

PepsiCo Flexes Its Pricing Power

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Image Shown: PepsiCo Inc is adeptly navigating various inflationary, labor, and logistical hurdles. Investors have started to warm back up to the name and its impressive pricing power over the past several months. By Callum Turcan On October 5, beverage and snack giant PepsiCo Inc (PEP) reported third-quarter earnings for fiscal 2021 (period ended September 4, 2021) that beat both consensus top- and bottom-line estimates. PepsiCo also raised its full-year guidance for fiscal 2021 in conjunction with the report. Earnings Snapshot The firm’s GAAP revenues grew by 12% year-over-year and its GAAP operating income climbed higher 5% year-over-year in the fiscal third quarter. Strength at PepsiCo’s snacks and beverage business in the Americas, Africa, Middle East, and Asia was key, … Read more

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.