PepsiCo On Track To Beat Earnings Estimates Again; Stock Has Over 10% Upside Potential

The Harrison, New York-based global food and beverage leader PepsiCo is expected to report its third-quarter earnings of $1.72 per share, which represents year-over-year growth of about 4% from $1.66 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 7% to $19.3 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of over 8%.

“Analysts expect that PepsiCo will report full-year earnings of $6.05 per share for the current fiscal year, with EPS estimates ranging from $5.91 to $6.13. For the next year, analysts expect that the firm will post earnings of $6.54 per share, with EPS estimates ranging from $6.34 to $6.77,” noted analysts at ZACKS Research.

PepsiCo shares have only risen over 1% so far this year.

Analyst Comments

“We expect another PepsiCo (PEP) EPS beat in Q3, and another quarter of strong organic sales growth confirming higher LT topline growth after Pepsi’s reinvestment in marketing/cap-ex in recent years. Valuation still looks compelling with Pepsi at only a ~3% CY23 EV/EBITDA premium to lower growth food peers,” noted Dara Mohsenian, Equity Analyst at Morgan Stanley.

“We are increasingly confident in a sustained pickup in organic sales growth at PepsiCo (PEP) longer-term, driven by favourable strategic changes under a relatively new CEO (Ramon Laguarta), including higher reinvestment in the business in marketing/cap-ex, PEP’s mix shift to the higher growth/ higher margin snacks category (representing ~2/3 of PEP’s profit), as well as improving topline trends in beverages post COVID, due to a category rebound and sequentially improving PEP market share performance. As shown below, PEP 2-Yr average organic sales growth accelerated during Laguarta’s tenure from 3% in 2017 and 2018 pre his arrival steadily to 4.1% in 2019 and 4.4% in 2020 post strategy changes, and further to 5.8% in H1 of 2021.”

PepsiCo Stock Price Forecast

Thirteen analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $166.08 with a high forecast of $185.00 and a low forecast of $155.00.

The average price target represents a 10.42% change from the last price of $150.41. From those 13 analysts, seven rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $172 with a high of $200 under a bull scenario and $114 under the worst-case scenario. The firm gave an “Overweight” rating on the beverage company’s stock.

Several other analysts have also updated their stock outlook. Deutsche Bank raised the target price to $158 from $154. Guggenheim lifted the target price to $175 from $171. UBS upped the target price to $170 from $168.

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