Unlike competitor The Coca-Cola Co. (NYSE: KO), Pepsi has recalled its bottling companies to the mother ship. Coke maintains control of a number of bottling companies, including four that are traded in the US: Coca-Cola Enterprises Inc. (NYSE: CCE), Coca-Cola Bottling Co. (NASDAQ: COKE), Coca-Cola Hellenic Bottling Co. (NYSE: CCH), and Coca-Cola FEMSA S.A.B. de C.V. (NYSE: KOF). Pepsi incurred charges of $2 million in the quarter related to its re-integration of its bottling companies.

Pepsi’s sales in its Latin American foods division grew 11% year-over-year, and operating profit gained 10% in the division. That offset declines in operating profit in the company’s Americas beverages division.

The company’s CEO had this to say about where the company’s focus would be for the rest of this year:

Our top priorities include stepping up our brand support through increased advertising and marketing, accelerating our innovation, and driving an aggressive productivity agenda that includes a significant restructuring program.

For the full year, Pepsi reiterated guidance of a -5% decline in adjusted EPS from last year’s EPS of $4.40. The company expects an unfavorable currency impact of another -2%. The consensus estimate is $4.09, exactly in line with Pepsi’s guidance. The company also plans to repurchase $3 billion in common stock this year and to pay $3.3 billion in dividends.

Shares of Pepsico are up 0.34% in pre-market trading, at $66.90 in a 52-weeki range of $58.50-$71.89.

Paul Ausick

These are the conclusions of a new report from Standard and Poor’s in which the agency lowers Europe’s GDP growth forecasts for the rest of 2011 and all of 2012.  What does this slowdown mean for US companies that do significant business in Europe?

S&P sees demand for European goods continuing to grow in emerging markets, but that’s not much help for US industries’ European sales. But European capital spending is increasing slightly, which should continue to be good news for Caterpillar Corp. (NYSE: CAT), which generated 26% of its total revenues last quarter in Europe, at a year-over-year growth rate of 53%, the highest of all the company’s geographic regions. Other industrial manufacturers like Flowserve Corp. (NYSE: FLS), Paccar Inc. (NASDAQ: PCAR), Owens-Illinois Inc. (NYSE: OI), and Pall Corp. (NYSE: PLL), all of which do more than 40% of their business in Europe, could also benefit from increased capital spending.

Technology companies like Adobe Systems Inc. (NASDAQ: ADBE), which does about 33% of its business in Europe, and Lexmark International Inc. (NYSE: LXK), with 36% of its business in Europe, have not had a lot of success in Europe recently and increased capital spending may not help tech companies very much..

Consumer-oriented companies like automakers Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) and tobacco company Philip Morris International (NYSE: PM) have experienced sales declines. The European “cash for clunkers” programs finally expired last quarter and that has put a damper on new car sales.

Some consumer products are doing fine, however. Coca-Cola Enterprises (NYSE: CCE) does about 60% of its business in Europe and it reports good sales growth. But a bottle of Coke is a lot cheaper than even a Ford Escort.

Fast-food leader McDonald’s Corp. (NYSE: MCD) got 22% of its revenue from its European region last quarter. Comparable store sales for the quarter were up 5.2% year-over-year. Yum! Brands Inc. (NYSE: YUM) is more focused on building its operations in China, but sales in its international division, which includes Europe, grew 6% in the second quarter, with same-store sales up 2%.

S&P expects a “rather more gloomy outlook emerging for consumer demand” in the UK than in the rest of Europe. Like their American cousins, citizens of the UK are more highly leveraged than Eurozone citizens. The UK is deleveraging, which, in turn, causes spending on consumer goods to fall. High unemployment and government austerity moves don’t really help the situation.

S&P now expects German GDP to grow at 2% in 2012, down from a forecast of 2.5% in July. Growth in France is now forecast at 1.7%, compared with 1.9% for 2012 just a month ago. The GDP growth forecast for Spain has been cut from 1.5% to 1%, and the UK forecast for 2012 from 2% to 1.8%.

Even if the S&P forecasts turn out to be on target, GDP growth in Europe will be about the same as forecast for the US. That’s not a particularly bright picture for the next 18 months. The only consolation is that it could be worse.

Paul Ausick

Yahoo! Inc. (NASDAQ: YHOO) is a repeat member here for the second quarter in a row.  The companies deleted from the list were as follows: Ascent Media Corporation (NASDAQ: ASCMA); Coca-Cola Enterprises, Inc. (NYSE: CCE); CVS Caremark Corporation (NYSE: CVS); and Navistar International Corporation (NYSE: NAV).

Airgas Inc. (NYSE: ARG) is called “Gassed Up For Growth” with growth driven by manufacturing, medical, petrochemical, and utilities customers with 2012 sales growth of 11% and 35% earnings growth.  The old Air Products $70 bid is a plus, but Gabelli gave a private market value of $88 per share in 2012, implying more than 25% upside.

CF Industries (NYSE: CF) is called the “Fertilizer Boost” where increased demand from global crop shortages is fueling more plantings. Gabelli’s boost is somewhat based upon the belief that poor weather hurt crop yields and that the crop report will come in weaker than expected.  That should drive demand and offer earnings upside.  Its private market value was put at $230 per share in 2012, implying upside of close to 50%.

Snyder’s-Lance Inc (NASDAQ: LNCE) is the snack cracker company you know along with the Cape Cod chips brand and Gabelli sees earnings growing from $0.85 this year to $2.00 in 2015 as the private label business pressures ease along with a strong dividend.  Its private market value is $27.00 per share for 2012, implying about 30% upside.

TECO Energy Inc. (NYSE: TE) is featured as “Met Coal For Sale?” having long-term value and earnings power that should benefit from a constructive regulatory environment and favorable demographic trends. This is more of a special situation as Gabelli has a ‘sum of the parts’ analysis.  It derived a private market value of $28.00, implying just over 50% upside expectations.

Yahoo! Inc. (NASDAQ: YHOO) is called “Time For Action” where the core business and its investments put in a floor for the stock when you consider the value in Alibaba and Yahoo! Japan.  The private market value was put at $21.00, implying more than 60% upside.  The Thomson Reuters consensus price target is ‘only’ $17.86 and that $21 level meets the high on Wall Street as far as analyst price target objectives.

JON C. OGG

If you want to know why this list matters, the numbers speak for themselves.  In 2006, this list performed 19.18% versus 9.51% for the S&P 500; in 2007 that was 4.69% versus -6.93% for the S&P 500, in 2008 that was 9.21% versus -38.30% in the S&P 500, in 2009 that was 88.80% versus 30.03% for the S&P 500, and in 2010 that was 24.38% versus 19.76% for the S&P 500.  The return was lower during the first quarter of 2011 at 2.37% versus 6.03% for the S&P 500 Index.  We have outlined some of the bullet points below.

Ascent Media Corporation (NASDAQ: ASCMA) is highlighted for its recapitalization with a Buy rating during the sale of media assets and the acquisition of Monitronics, holding $260 million in cash, $60 million in real estate, and significant NOLs (loss carry-forwards). Gabelli’s so-called private market value is put in the mid-$60′s versus about $48.50 currently.

Coca-Cola Enterprises Inc. (NYSE: CCE) as the Western European bottler is expected to generate about $3.7 billion in cash flow thru 2015 for more repurchases.  With a share price around $28.40, the Gabelli private market value was put at $36.00. For a comparison, Thomson Reuters has a mean objective price target of only about $30.25.

CVS Caremark Corporation (NYSE: CVS) is one called ‘time to split’ as its trades at a discount to peers with some $5 billion in contract losses and lower margins.  Gabelli thinks new management should consider a split-up of the company and gave a sum of the parts value of $52.00 per share versus $36.22 today.  For a comparison, this is well above consensus as Thomson Reuters has a mean objective price target of about $38.90.

Navistar International Corporation (NYSE: NAV) is seeing more freight shipping, high fleet utilization, and what is an aging national truck fleet that should all drive demand.  Its private market value was put at $80.00 versus about $69.50 today. For a comparison, this is above-consensus as Thomson Reuters has a mean objective price target of about $77.27.

Yahoo! Inc. (NASDAQ: YHOO) is perhaps the biggest or most easily recognized call from Gabelli for investors, with the call that cash and minority stakes in Alibaba Group and Yahoo! Japan come to a value of “at least $13.60 per share” alone in value and believes there is limited downside at only  about 2.5-times expected 2011 EBITDA. Gabelli’s private market value was put at $23.00 per share versus anout $17.70 in the market.  For a comparison, this is well above average as Thomson Reuters has a mean objective price target of about $19.26.

JON C. OGG

Allied Irish Banks plc (NYSE: AIB) Raised to Buy at Societe Generale.
Coca-Cola Enterprises (NYSE: CCE) Raised to Buy at Stifel Nicolaus.
CSX Corp. (NYSE: CSX)  Raised to Outperform at Morgan Keegan.
Goodrich Corporation (NYSE: GR) Cut to Perform at Oppenheimer.
Halliburton Co. (NYSE: HAL) Maintained Buy but removed from Conviction Buy List at Goldman Sachs.
Kaiser Aluminum Corporation (NASDAQ: KALU) Raised to Buy at UBS.
Las Vegas Sands (NYSE: LVS) Raised to Buy at Janney.
Nasdaq OMX Group (NASDAQ: NDAQ) Raised to Outperform at KBW.
Norfolk Southern Corp. (NYSE: NSC)  Raised to Outperform at Morgan Keegan.
Priceline.com (NASDAQ: PCLN) Raised to Buy at KeyBanc.
Union Pacific Corporation (NYSE: UNP) Raised to Outperform at Morgan Keegan.
Universal Display Corp. (NASDAQ: PANL) Raised to Buy at Canaccord.
Visa, Inc. (NYSE: V) Raised to Buy at Stifel Nicolaus.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Sponsor: 26 Cheap Stocks to Sell – Cheap stocks have been on a tear recently, but nine out of ten stocks are circling the drain!

Altria Group Inc. (NYSE: MO) and HJ Heinz Co. (NYSE: HNZ) offered guidance this week with the promise or hint of a higher dividend payout coming soon.  Daimler AG (NYSE: DAI) and Home Properties Inc.’s (NYSE: HME) cut their dividends this week and the reactions look far from favorable.  In the new-normal, ,any investors are looking for return via income rather than just growth shares that have no income paid to common holders.  A description and yield has been broken down for each.

The Coca-Cola Company (NYSE: KO) raised its dividend by over 7% to $0.44 per quarter.  This DJIA component now commands a dividend yield of 3.15%.  As far as its dividend coverage, there are far more dividend hikes possible down the road.  Thomson Reuters expects 2010 earnings at $3.42 EPS and 2011 earnings at $3.74 EPS.  With annual payments now being $1.76, there is plenty of room for Coke to pour more cash out of the fountain machines into the cups of shareholders.  Also seen was a hike from Coca-Cola Enterprises (NYSE :CCE), which raised its quarterly dividend by 12.5% to $0.09 per common share.  Its new yield based on Thursday’s close is about 1.8%.

Tiffany & Co. (NYSE: TIF) was very much a surprise to see it raise the quarterly payout.  Even if the company has held up far better in the recession than many would have guessed, it does have significant exposure to the economy due to it being a jewelry company.  The dividend was bumped up 18% to $0.20 per quarter for a current future yield of about 1.85%.

Gold miners and producers are almost never thought of as big dividend bets.  Yet Kinross Gold Corporation (NYSE: KGC) and AngloGold Ashanti (NYSE: AU) hiked their quarterly payouts from a year ago.  Kinross’ Board of Directors declared a $0.05 per share dividend.  That is the same semi-annual dividend announced in September-2009 but is up from the March-2009 level of $0.04.  The yield there is about 0.5%.  AngloGold Ashanti (NYSE: AU) announced that its final dividend of 70 South African cents per share is 17% more than the interim dividend of 2009.  Its total dividend declaration of 130 South African cents was listed as a 30% improvement on 2008′s final declaration.

P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) was a dividend surprise.  The company said that the amount of its cash dividend will be based on 45% of its quarterly net income and is expected to total approximately $0.90 per share relating to fiscal 2010.  Before this week there had been no dividends paid to holders.  Based upon Thursday’s close the stock’s dividend yield is 2.1%.

Transocean Ltd. (NYSE: RIG) has never been thought of as a huge dividend stock.  This week its board authorized CHF 3.5 Billion for share buybacks and will seek shareholder approval for a US$1.0 Billion dividend.  The dividend portion here is listed as about $3.11 per share, which would generate a yield of 3.7%.

Altria Group Inc. (NYSE: MO) did not hike its dividend, but hinted that another hike is coming down the road.  Altria reaffirmed this week that it expects 2010 guidance to increase to a range of $1.85 to $1.89 EPS, representing a growth rate of 6% to 8% from an adjusted base of $1.75 per share in 2009….. “As a result of the challenging economic environment” it revised its mid-term adjusted EPS growth objective to 7% to 9%.  The company noted, …”which offers an attractive EPS and dividend growth prospect to shareholders.”  In short, more hikes are coming on top of its almost-7% yield.

HJ Heinz Co. (NYSE: HNZ) raised its guidance this week to $2.82 to $2.85 EPS for 2010 and noted for the dividend in 2011…. “delivering very strong cash flow and, to that end, we expect to deliver a dividend increase for Fiscal 2011 commensurate with our strong profit growth.”  The current dividend yield here is about 3.7%.

Daimler AG (NYSE: DAI) acted yesterday as the poster child of what not to do.  The German car giant gave a 2010 outlook meant to reassure investors that was far from reassuring. It posted an unexpected net loss in it latest quarter and decided that it would scrap its annual dividend/  We saw shares down almost 7% early Thursday but the stock’s ADR ended up closing down ‘only’ 4.7%.

Home Properties Inc.’s (NYSE: HME) gave fourth-quarter earnings last night and the apartment REIT said that its profit was down by more than 50%.  It then proceeded to cut its quarterly dividend by 13% because of a delayed economic recovery expectation.  Most investors buy REITs because they have high payouts and it looks like the 5.8% yield here is no more.

If you are a dividend and income oriented investor, we have lists of companies which have not yet hiked their dividends or not yet started paying dividends that we expect to see raises to in 2010.  The primary list of giants we expect to raise their dividends includes J.P.Morgan Chase & Co. (NYSE: JPM), General Electric Co. (NYSE: GE), and many others.  A second list includes Mattel, Inc. (NYSE: MAT), American Water Works Company, Inc. (NYSE: AWK), Exxon Mobil Corp. (NYSE: XOM), and others for dividend hikes.

You are invited to join our free daily email distribution list to hear about top analyst upgrades and downgrades, IPOs and secondary offerings, ongoing day trader and options trader alerts, stock and market rumors, Buffett and guru investor news, M&A and more.

JON C. OGG
FEBRUARY 19, 2010

Coca-Cola Enterprises (CCE) Raised to Buy at UBS.
DR Horton (DRI) Cut to Sell at Citigroup.
JA Solar (JASO) Cut to Equal Weight at Barclays.
Mosaic (MOS) Started as Overweight at Thomas Weisel.
Nokia (NOK) Cut to Neutral at Goldman Sachs.
Palm (PALM) Cut to Sell at Morgan Joseph.
Pan-American Silver (PAAS) Raised to Buy at UBS.
Potash Corp. (POT) Started as Overweight at Thomas Weisel.
ReneSola (SOL) Raised to Outperform at Credit Suisse; but cut to Underweight at Piper Jaffray.
Tellabs (TLAB) Raised to Outperform at Morgan Keegan.

JON C. OGG
AUGUST 13, 2009

Acorda Therapeutics (ACOR) Raised to Overweight at Piper Jaffray.
Coca-Cola Entertainment (CCE) Raised to Buy at Argus.
Cree (CREE) Raised to Buy at Merriman Curhan Ford.
CVS Caremark (CVS) Raised to Outperform at William Blair.
IntercontinentalExchange (ICE) Raised to Market Perform at KBW.
Savvis (SVVS) Raised to Overweight at Morgan Stanley.

JON C. OGG
AUGUST 5, 2009

Interestingly enough, this could have traders (and investment bankers) looking toward Coca-Cola Bottling Co. Consolidated (NASDAQ: COKE), Coca-Cola Enterprises Inc. (NYSE: CCE), Coca-Cola FEMSA S.A.B de CV (NYSE: KOF), and Coca-Cola Hellenic Bottling Company S.A. (NYSE: CCH)… all of which are tied to The Coca-Cola Company (NYSE: KO).

Under the agreements, Pepsi Bottling Group, Inc. (PBG) holders will have the option to receive either $36.50 in cash or 0.6432 shares of PepsiCo common stock.  That value was $36.50 based on PepsiCo’s closing share price of $56.75 on July 31, 2009.  That is subject to proration such that the aggregate consideration to be paid to PBG shareholders shall be 50% cash and 50% PepsiCo common stock.

In a similar deal, PepsiAmericas (PAS) shareholders will have the option to receive either $28.50 in cash or 0.5022 shares of PepsiCo common stock.  That had a value of $28.50 based on PepsiCo closing share price of $56.75 on July 31, 2009.  It is also subject to proration such that the aggregate consideration to be paid to PAS shareholders shall be 50% cash and 50% PepsiCo common stock.

This is not a small deal at all, particularly considering that these mergers are for the stakes not already owned.  The total value of the shares that PepsiCo is acquiring comes to roughly $7.8 billion.  Based on the recommendations of the Special Committee of PBG and the Transactions Committee of PAS, the boards of directors of both companies have approved the merger transactions.

Pepsi gave the end game numbers here.  It sees annual pre-tax synergies of $300 million by 2012 and expects these mergers to be accretive to PepsiCo’s earnings by about $0.15 on earnings per share when synergies are fully realized in 2012.

We have yet to see much action in the rival play here in an investor Pepsi vs. Coke taste challenge.  Coca-Cola Bottling Co. Consolidated (NASDAQ: COKE), Coca-Cola Enterprises Inc. (NYSE: CCE), Coca-Cola FEMSA S.A.B de CV (NYSE: KOF), and Coca-Cola Hellenic Bottling Company S.A. (NYSE: CCH) are all tied to The Coca-Cola Company (NYSE: KO).  Our sources have noted that there is not the same appetite to make this sort of transaction that Pepsi has embarked upon, although that was back in April and May and anything could have changed by then.

JON C. OGG
AUGUST 4, 2009

Coca-Cola Bottling Co. Consolidated (COKE), Coca-Cola Enterprises Inc. (NYSE: CCE), Coca-Cola FEMSA S.A.B de CV (NYSE: KOF), and Coca-Cola Hellenic Bottling Company S.A. (NYSE: CCH) are all affiliated companies.

Pepsico (NYSE: PEP) shares are down over 4% at $50.02 today.  A $6 billion buyout compares to a new market cap of almost $78 billion.  The Coca-Cola Company (KO) is down 2.4% with the broad market today and in sympathy with Pepsi.  It would be a kid’s game to only hang your hat on the 17% that Pepsi is offering to see if Coke would do the same, but this is somewhat uncharted and has to start at least somewhere.  We wanted to take a look at what an implied 17% gain would like for Coke’s affiliated entities.

Coca-Cola Bottling Co. Consolidated (NASDAQ: COKE) is based in Charlotte, NC and is into the production, marketing, and distribution of carbonated nonalcoholic beverages primarily of Coca-Cola.  Operations are throughout the Central East Coast and parts of the Southeast. Its shares are up 1% at $54.28 and its market cap is just shy of $500 million.

Coca-Cola Enterprises Inc. (NYSE: CCE) is also based in Atlanta, GA and is in the manufacturing, distribution, and marketing of nonalcoholic beverages and offers its products principally under the Coca-Cola classic, Sprite, Dasani, POWERade, Coca-Cola, Diet Coke/Coca-Cola light, Fanta, Coca-Cola Zero, and Capri-Sun brand names.  It sells through wholesalers and retailers primarily in North America, the U.K. and Europe.  Its shares are up 3% at $15.39 and its market cap is $7.5 billion.

Coca-Cola FEMSA S.A.B de CV (NYSE: KOF) is based in Mexico, City which is a bottler of Coca-Cola trademark beverages in Latin America.  If you have forgotten, this is one of the rather large Bill Gates holdings.  FEMSA’s market cap is $6.73 billion and its shares are down 3.5% at $36.47 today.

Coca-Cola Hellenic Bottling Company S.A. (NYSE: CCH) is based in Athens, Greece and it produces, distributes, and sells non-alcoholic beverages under a franchise of the Coca-Cola name serving approximately 550 million people in 28 countries throughout Europe, Eastern Europe, and Russia.  Hellenic’s stock is off almost 4% at $15.32 today and its market cap is $5.6 billion.

Pepsi has said that this will become accretive to earnings and will streamline its operations.  It is very possible that the same could come true for Coca-Cola.  The problem is that this would come with a much larger price tag.  Just like Pepsico, it also holds interests.  That means that it would not all be entirely add-on capital to the market caps with a 17% premium in simple math.  But if you tally up the US-equivalent of the stated market caps of the Coca-Cola bottling and distributing its goods comes to a whopping sum in excess of $21 billion.  That is before backing out the company’s interest, but that is also before lumping in a premium to the share prices.

Coca-Cola’s market cap is just north of $102 billion.  That would put the entire tab at a much higher price nominally.  Both Pepsi and Coca-Cola are still closer to their 52-week lows than they are to their respective highs.  Both should easily have access to the capital markets, particularly if the deals can be financed as a streamlining of operation or for more efficiency.  It looks like it is just a lot cheaper for Pepsi to do this over what it would cost Coca-Cola.

Stay tuned.

Jon C. Ogg
April 20, 2009