Pepsico: ?A Long Road Ahead?

[Stocks-to-Watch]

Pepsico (PEP) is trading lower today after the company beat earnings expectations, and announced it will layoff 8,700 people as part of a plan to cut $1.5 billion in annual costs by 2014.

Pepsi posted $1.15 of core EPS, two cents better than expectations. Worldwide volume rose 7%.* But the Street was more focused on the company’s plans, and the general sentiment wasn’t particularly positive. Along with the job and expense cuts, Pepsi is planning to increase its marketing budget, particularly for core brands like Mountain Dew and Doritos. Shares fell 3.6% in afternoon trading.

As Wells Fargo analyst Bonnie Herzog wrote in a note warning that there’s a “long road ahead”:

“Our quick thoughts – we do not believe that the key elements of today’s announcement will fully satisfy investors’ expectations and we think the shares could be pressured today. Moreover, commentary from the meeting confirms our long-standing view that PEP’s turnaround is a multi-year initiative. We maintain our Market Perform rating, but think investors may see better entry points in the near term”

Original Article Source by Barrons.com