PepsiCo (PEP 1.36%) popped after reporting earnings on October 9th, with its shares hitting an intraday record high of $96.22. The move came on the heels of Pepsi's third-quarter earnings results, which exceeded Wall Street's expectations on both the top and bottom lines. It was also the second time year-to-date that the company has raised its full-year profit estimates. This earnings beat comes at a critical time for the soda and snack giant, as activist investors have been pushing Pepsi to separate the two businesses. Let's take a closer look at what it all means, and whether investors should buy PepsiCo stock at its current levels.

This is what a comeback looks like
Pepsi battled declining carbonated beverage sales in recent quarters. However, thanks to ongoing cost cutting, pricing power, and the underlying strength of its Frito-Lay business, the company is making a comeback. The stock is up more than 15% so far this year, and Pepsi's latest results demonstrate why. For the period ended in September, PepsiCo grew its earnings-per-share 7% to $1.32. That topped analysts' estimates for earnings of $1.29 per share in the period.

Revenue was also stronger than expected, climbing 2% to $17.2 billion in the third quarter. That narrowly beat the Street's estimates for quarterly revenue of $17.09 billion. Because of higher prices and cost cutting efforts, Pepsi's operating margins expanded for the ninth consecutive quarter. The company is on pace to achieve $1 billion in productivity savings this year. Moreover, the spike in Pepsi's profitability in the quarter led the king of pop to raise its full-year EPS growth outlook to 9%, up from previous estimates for earnings growth of just 7% this year.

Source: PepsiCo. 

PepsiCo's chief executive Indra Nooyi summed up the quarterly results saying, "We achieved these results because our brands are strong, our product portfolio is on-trend, our geographic footprint is broad and diverse, and we are executing well in the marketplace."

Overall, it was a very productive quarter for the company. However, as Foolish (capital F) investors we know that quarterly results only tell half of the story. Before jumping in it is equally important to look at the underlying fundamentals of the business.

In Pepsi's case, the fundamentals look good thanks to the company's ability to generate loads of free cash flow coupled with its portfolio of leading brands.

Pepsi is the world's largest snack food company by market share today, with 22 brands in its snack business that each pull in annual sales north of $1 billion. Better still, PepsiCo was the largest contributor to U.S. retail sales growth in the third quarter and one of the top 30 food and beverage manufacturers year-to-date, according to research from IRI Data. This further demonstrates the strength of both its beverage and snacks businesses today.

Additionally, as longtime shareholders can attest, PepsiCo knows how to reward its stockholders. Pepsi's management does a terrific job of creating shareholder value, while also reinvesting ample cash into its business. The company is a top dividend stock and is on track to return as much as $8.7 billion to shareholders this year through dividends and share buybacks. Investors can expect management to continue growing its dividend in the quarters ahead, because Pepsi has increased its payout for the past 42 straight years.

For these reasons, PepsiCo stock looks like a winning pick for long-term investors, despite shares trading at record highs today. Moreover, even at the top of its 52-week range, shares of Pepsi are priced at a reasonable 20 times earnings with a price-to-earnings-growth ratio of 2.67, which is inline with the industry average.