Ramon Laguarta needs to focus on international business, snacks, and North American beverages as he takes over PepsiCo, Inc. (PEP) to keep up with the competition .
Pepsi shares have fallen 8.5% year to date and are sliding again today, falling 1.7% as of 2:19 p.m. in New York. By contrast, chief rival Coca Cola Co. (KO) gained 1.3% year to date.
As a result, Pepsi is currently considered no more than "an okay place to park some funds" by traders like James "Rev Shark" DePorre.
In order to reverse that trend, Laguarta need look no further than these three growth engines.
As a Barcelona-born polyglot and former head of one of Pepsi's international divisions, it makes sense that Laguarta might look abroad.
Luckily for him, the momentum is already in place.
"Developing and emerging markets growth was very solid at 10%, with strength across the board," Morgan Stanley (MS) executive director Dara Mohsenian said in his analysis of the earnings on Tuesday. "Emerging markets growth was much stronger than expected."
Given the attractive opportunity and continued expansion, Mohsenian assigned a $127 price target and an overweight rating for the soda leader.
BMO Capital Markets (BMO) vice president noted "continued strong organic growth in international markets" as a positive sign for the company in this past quarter as well.
To be sure, he was not ready to issue a buy rating given the lowered guidance and newly revealed headwinds in foreign exchange impacting this segment. Instead Sharma issued a neutral rating and an $110 price target.
Laguarta thus will be forced to prove his ability to surmount these headwinds to continue expanding in profitable growth engines abroad.
A continued turnaround in North American Beverages segment, the largest revenue driver for the company, will be vital to turning around the Pepsi narrative in traders' minds.
In this morning's earnings presentation, Nooyi was positive on the unit.
The unit has fallen on hard times as of late as the unit fails to contribute to the level it once did given changing consumer appetites.
"North America Beverages delivered another quarter of sequential improvement in top-line performance," she said.
The 2% revenue growth in the unit that oversees Gatorade, Mountain Dew, and Pepsi products among others is a positive sign as consumers trend away from sugary drinks.
"Mountain Dew's performance is benefiting from the launch of Mountain Dew Ice, another launch which should surpass $100 million of retail in its first year," Nooyi said in highlighting specific growth drivers.
As a result of the strong growth in the NAB segment, PepsiCo was the largest contributor to retail food and beverage growth in the United States, according to Nooyi.
Promotions like Mountain Dew's and the top pole position Nooyi has helped build in the region offer a path to Laguarta as he tries to build on these results and keep the momentum going.
Snacks Soar in America
One of the most positive notes which Laguarta can build upon is the snack unit's momentum.
Frito Lay North America was touted for strong revenue growth, reflecting the company's increased focus on snacks under Nooyi's leadership.
As of the last available 10-K filing, Frito-Lay made up approximately 25% of the company's net revenue.
Quaker Foods North America also posted revenue growth for the quarter, marking its fifth consecutive quarter to do so.
Analysts see this as a positive sign that Laguarta can keep rolling alongside the aforementioned categories.
"On a divisional basis, Quaker Foods and three international divisions came in nicely ahead of expectations," J.P. Morgan (JPM) managing director Andrea Teixera wrote in a note on Tuesday.
Her confidence in Quaker Foods, which Nooyi has helped grow to a United States staple.
"We assume organic sales growth of 3% in 2018 and 2019, driven by solid snacks growth," Morgan Stanley's Dara Mohsenian said in justifying his bullish rating on Pepsi.
Laguarta will need to sustain this growth and actually increase it in order to stay in line with what many analysts see as a major growth engine for the company.
Laguarta will have a number of issues to overcome as he takes the reins from long-time CEO, including problems with tariffs, transportation pricing, and a strengthening U.S. dollar.
However, if he can focus on the serious growth engines and key business segments that do exist in Pepsi's overall business, the overall story he could tell could be more compelling than these minor roadblocks in his way.