Quaker Oats

Quaker Oats, despite its name, is a diversified food and beverage company which provides not only the namesake breakfast cereal, but a variety of products (including Gatorade) on a worldwide basis. The company has used a growth through acquisition strategy throughout much of the early 1990s, but it has also sold off those businesses which are not part of its core market. As a result, the company is much less diversified than it was at the beginning of the decade. The sell-offs and restructurings which accompanied them have taken their toll on the company's financial performance, and the stock price has varied little until recent months, when it began turning upward and has seen nearly a 20 percent increase since mid-1996. This research examines the financial performance of the company and considers where the stock price might be in a year's time.

Quaker Oats is a major participant in the highly competitive global packaged food and beverage industry, and is a leading manufacturer of sports beverages, premium iced tea and single-serve juice drinks, hot cereals, pancake mixes, grain-based snacks, cornmeal, hominy grits and value-added rice products. In addition, Quaker Oats is the second-largest manufacturer of syrups and value-added pasta products and is among the five largest manufacturers in the world of ready-to-eat cereals and dry pasta products. Because of its global presence, the company is susceptible to fluctuations in currency r

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425600 -56% Income Before Dep & Amort 125700 603200 -79% NonOp Income -42200 -125900 -66% Interest Expense 57900 98600 -41% EBIT 25600 378700 -93% Income Taxes 11900 147200 -92% Net Income 13700 231500 -94% The company's net income plummeted between 1994 and 1995, a result of the sale of some of the company's stronger business units. This is one of the concerns which analysts watching the company have expressed, and the lack of revenue is indeed troubling. However, the company is focusing efforts on building its Snapple division, and there is considerable room for improvement in this area. The Gatorade sector has also largely been overshadowed by the poor Snapple performance, but the Gatorade sector has been a stellar performer among the Quaker Oats business units (Mauboussin 5). The company's divestiture strategy only makes sense if the company is able to improve its net income performance as a result. While this has not been the case at this time, the company is making improvements in this area and may well bolster this segment in the next 12 months. Common Size Income Statement 1995 1994 Sales 100% 100% COGS 56% 49% Gross M

Category: Business - Q