Oct 28 - Deutsche Bank upgraded PepsiCo Inc to "buy" from "hold," saying the recent decline in the company's share price reflects "too much operational pessimism."
The U.S. food and drink maker may benefit from lower input costs next year and a more reasoned approach to domestic soft drink business challenges than its main competitors, Coca-Cola Co and Coca-Cola Enterprises Inc , Deutsche said.
However, the brokerage lowered its 2008 and 2009 earnings estimates for the company, citing currency exposures in Europe and Latin America.
The brokerage forecast 2008 earnings per share of $3.65 for the company, down from its prior view of $3.68. It expects PepsiCo to earn $3.88 a share in 2009, down from its previous estimate of $3.94.
"We are lowering our below-consensus estimates to factor in even more conservative currency and profit growth in PEP International, as key currencies trend down and consumer slowdown outside the U.S. becomes increasingly apparent," Deutsche wrote.
The brokerage said it sees some 2009 downside risk from lower volume growth, particularly in Latam, but potentially significant upside from better U.S. beverage growth.
Deutsche cut its price target to $64 from $65 on the stock, which closed at $51.76 Friday on the New York Stock Exchange. Shares of the company have shed 26 percent in the last one month.