PepsiCo Inc.

J.C. PENNEY CO. INC., $26.29, New York symbol JCP, fell 23% this week after the company reported much-worse-than-expected quarterly earnings. It also suspended its $0.20-a-share quarterly dividend to conserve cash. Penney operates more than 1,100 department stores in the U.S. and Puerto Rico. It also sells goods over the Internet. The company recently began a major restructuring that includes shifting to an everyday pricing strategy. The company feels that predictable prices will spur customers to visit more often instead of waiting for items to go on sale....

MICROSOFT CORP., $30.98, Nasdaq symbol MSFT, aims to enter the fast-growing e-book field through a new alliance with bookseller Barnes & Noble Inc. (New York symbol BKS). This week, Microsoft agreed to buy 17.6% of a subsidiary of Barnes & Noble that will operate Barnes & Noble’s Nook e-book business; Barnes & Noble will own the remaining 82.4%. This new firm will also include Barnes & Noble’s college textbook operations. Microsoft will pay $300 million for this interest. That’s equal to just 5.9% of the $5.1 billion, or $0.60 a share, that the company earned in the three months ended March 31, 2012. Still, this move should help Microsoft develop new software for the Nook e-book reader and other mobile devices. That would help it compete with the Apple iPad tablet computer and Amazon.com’s Kindle e-book reader....

As the stock market rebounded in 2009 from one of the worst crises in years, Pat McKeough was invited by Jonathan Chevreau of the Financial Post to appear on his ‘Wealthy Boomer’ telecast. In a two-part interview, Pat aired his views on a wide variety of investment subjects. Now, with the stock market coming off last autumn’s lows, we think it’s an appropriate time to replay the interview. Pat discusses not only specific solutions for volatile markets, but also how his investment advice applies in all market conditions. Here is part two of the interview, entitled “Spreading investments” on YouTube. (View part one here: Pat McKeough’s investment ideas as shown on YouTube.)...

WELLS FARGO & CO. $30 (New York symbol WFC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 5.3 billion; Market cap: $159.0 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.6%; TSINetwork Rating: Average; www.wellsfargo.com) earned $15.0 billion in 2011. That’s up 29.2% from $11.6 billion in 2010. Earnings per share rose 27.6%, to $2.82 from $2.21, on more shares outstanding. More clients are repaying their loans on time. As a result, loan-loss provisions fell 49.9%, to $7.9 billion from $15.8 billion. This was the main reason for earnings gain. Revenue fell 5.0%, to $80.9 billion from $85.2 billion. Demand for mortgages and credit cards is rising. However, the bank is getting less interest income from borrowers due to today’s low interest rates. Wells Fargo is still a hold....

Stevia Corp., $1.53, symbol STEV on the U.S. over-the-counter bulletin board (Shares outstanding: 52.8 million; Market cap: $80.8 million, www.stevia.co), hopes to develop and sell stevia, a zero-calorie, all-natural sweetener derived from Stevia Rebaudiana leaves. The plant, a member of the chrysanthemum family, is quickly gaining in popularity because it supplies sweetness without the calories or health drawbacks of sugar. Stevia has a negligible impact on blood sugar. To date, the company has signed contracts with potential growers in Vietnam. It has also acquired three nursery fields in that country. The U.S. Food & Drug Administration (FDA) has approved the sale of certain extracts from stevia leaves. These products are sold by Cargill, Coca-Cola, PepsiCo and other companies....

PEPSICO INC. $67 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $107.2 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pepsico.com) will make and distribute Ocean Spray cranberry drinks in Latin America under a new 20-year deal with Ocean Spray Cranberries, Inc.

The two companies already have a similar deal in the U.S., where Ocean Spray’s volumes have risen 20% since 2006. PepsiCo feels its marketing expertise and distribution networks will help it repeat this success in Latin America.

PepsiCo is a buy.

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Rising raw material costs are a growing challenge for these two beverage makers. However, their well-known brands give them strong customer loyalty. That makes it easier for them to raise prices without hurting sales volumes. Their growing overseas operations also enhance their long-term prospects. PEPSICO INC. $64 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $102.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pepsico.com) is the world’s second-largest soft-drink maker after Coca-Cola. It also makes other products, such as Frito-Lay snack foods, Tropicana fruit juices and Quaker Oats. PepsiCo recently raised its selling prices in response to rising ingredient costs. That’s the main reason why its sales rose 13.3% in the quarter ended September 3, 2011, to $17.6 billion from $15.5 billion a year earlier. In June 2011, PepsiCo paid $3.8 billion for Wimm-Bill-Dann, Russia’s largest dairy and juice company. This accounted for a third of the sales gain. Without unusual items, mainly costs to integrate recent acquisitions, earnings per share rose rose 7.4%, to $1.31 from $1.22....

PEPSICO INC. $64 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $102.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pepsico.com) is the world’s second-largest soft-drink maker after Coca-Cola. It also makes other products, such as Frito-Lay snack foods, Tropicana fruit juices and Quaker Oats.

PepsiCo recently raised its selling prices in response to rising ingredient costs. That’s the main reason why its sales rose 13.3% in the quarter ended September 3, 2011, to $17.6 billion from $15.5 billion a year earlier. In June 2011, PepsiCo paid $3.8 billion for Wimm-Bill-Dann, Russia’s largest dairy and juice company. This accounted for a third of the sales gain. Without unusual items, mainly costs to integrate recent acquisitions, earnings per share rose rose 7.4%, to $1.31 from $1.22.

PepsiCo continues to expand internationally. In November 2011, it paid an undisclosed sum for privately held Grupo Mabel, Brazil’s second-largest maker of cookies, crackers and snack foods. This business complements the foods that PepsiCo already sells in Brazil, including Frito-Lay chips (sold under the Elma Chips brand) and Quaker Oats snacks.

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ADOBE SYSTEMS INC., $28.43, Nasdaq symbol ADBE, fell 5% this week after the company announced a new restructuring plan. A big part of this plan is Adobe’s decision to quit making its Flash software for smartphones and other mobile devices (Flash lets web site developers make web pages more interactive by adding animation and video). That’s mainly because Apple Inc. (Nasdaq symbol AAPL) refused to include Flash in its hugely popular iPhone and iPad. Apple feels Flash is slow and uses too much battery power....

GOOGLE INC., $591.68, Nasdaq symbol GOOG, continues to profit as advertisers shift from publications to online ads.

In the three months ended September 30, 2011, Google’s revenue jumped 33.4%, to $9.7 billion from $7.3 billion a year earlier. If you deduct commissions that the company paid to its marketing partners, its revenue would have risen 37%, to $7.5 billion. That beat the consensus revenue estimate of $7.2 billion.

Google charges advertisers every time a user clicks on one of their ads. In the latest quarter, paid clicks rose 28%, while the average cost advertisers pay per click rose 5%.

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