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I got my start here on RealMoney while still being a stock analyst in 2011, so it’s always good to make a return. Definitely have not forgotten my roots even though my role here has changed since.
In this case, I return with some hot tips from my calls with Under Armour (UAA) founder Kevin Plank and PepsiCo (PEP) Chief Financial Officer Hugh Johnston immediately after earnings today. It’s rapid-fire time, baby.
Appreciated hearing the more determined Kevin Plank on the phone. Not that Plank has ever been a slacker, he is a great American success story. It’s just that I think he went off track a bit the past two years with various external ventures and within Under Armour. Plank sounded game on during our chat. Back in the trenches on innovation, but also resetting the vision for Under Armour.
That said, Plank’s new right hand executive Patrick Frisk is no slouch either. This is a top flight hire for Under Armour — Frisk basically transformed Timberland while at VF Corp. (VFC) (which churns out serious executives). Look for Frisk to use his years of retail experience to speed up Under Armour’s supply chain and drive more consistent execution around franchises (see new HOVR sneaker, which has gotten off to a strong start — lookout Adidas (ADDYY) ).
All in, I came away short-term bullish on Under Armour. Something in the external environment, or internally, will have to go very wrong for the stock to give back all of its gains notched today. Shame on that lame Wall Street analyst who slashed his rating on Under Armour to a strong sell after the earnings call. You know who you are, no need to divulge names.
Unfortunately, I came away with a different impression of PepsiCo after chatting with the well-regarded Johnston. Make no mistake, PepsiCo continues to be a beast. Frito-Lay is still a force in the supermarket aisle. The overall portfolio continues to do well overseas. But dang, the core beverage business is really starting to lag amid competition in the sports drink category and weakness in soda. Coca-Cola (KO) has stolen the soda narrative with its marketing push around new slim can, flavored diet sodas. Cutting advertising in key beverage areas last year didn’t help PepsiCo’s cause. Meanwhile, inflation is a rising area of concern for the company as is the case at all consumer packaged goods companies (attention Jerome Powell at the Federal Reserve, might want to hop on Procter & Gamble’s (PG) earnings transcript).
Further, I remain surprised PepsiCo is unwilling to pull the trigger on a big acquisition. It has the balance sheet, and given the changing retail landscape it should do a big deal. The company can’t build ever category itself (see new efforts in carbonated water), sometimes it’s better to buy growth.
All in, may want to take a more cautious approach on PepsiCo here. I think Wall Street continues to under-price the risk of consumers increasingly shopping for food online and Amazon (AMZN) and Walmart (WMT) waging an online price war when it comes to packaged food plays such as PepsiCo.
More big interviews this week planned. Notably with Coca-Cola CEO after earnings on Friday. Catch instant takes off these big interviews on Morning Jolt, whose archives are below. You’ll thank me later.
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