Evercore ISI analyst Robert Ottenstein has adjusted his outlook on PepsiCo (PEP, Financial), reducing the price target from $155 to $140 while maintaining an "In Line" rating for the stock. The decision reflects a cautious stance given several economic pressures facing the company this year.
PepsiCo is grappling with various challenges, including sluggish top-line performance, tariffs, currency exchange fluctuations, and rising interest expenses. Although the company's long-term efforts in productivity are expected to bolster earnings per share growth by fiscal year 2026 and beyond, these short-term hurdles appear to be more than what the company can offset at the moment.
Ottenstein also pointed out that PepsiCo's guidance for the current year remains uncertain and does not align with the company's historical growth rates. Typically, PepsiCo aims for 4%-6% growth in organic sales and high-single-digit growth in earnings per share, yet current projections fall short of these targets.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 21 analysts, the average target price for PepsiCo Inc (PEP, Financial) is $160.34 with a high estimate of $175.00 and a low estimate of $124.00. The average target implies an upside of 18.89% from the current price of $134.87. More detailed estimate data can be found on the PepsiCo Inc (PEP) Forecast page.
Based on the consensus recommendation from 24 brokerage firms, PepsiCo Inc's (PEP, Financial) average brokerage recommendation is currently 2.8, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for PepsiCo Inc (PEP, Financial) in one year is $185.70, suggesting a upside of 37.69% from the current price of $134.865. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the PepsiCo Inc (PEP) Summary page.
PEP Key Business Developments
Release Date: February 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PepsiCo Inc (PEP, Financial) is seeing growth in the salty and savory category, with consumers returning to the category, indicating a positive trend.
- The company is focusing on strategic investments in innovation and new spaces, such as away-from-home opportunities, which are expected to drive future growth.
- PepsiCo Inc (PEP) has a strong international business, contributing significantly to its growth, with a $40 billion business that is accretive to the company.
- The company is committed to systematic productivity improvements through automation, digitalization, and simplifying operations, which are expected to enhance efficiency.
- PepsiCo Inc (PEP) is focusing on consumer trends towards health and wellness, with investments in portion control, lower sodium, and lower fat products, aligning with evolving consumer preferences.
Negative Points
- Frito-Lay's volume growth has decelerated, raising concerns about the return on investment from recent reinvestments.
- The company's EPS guidance reflects less leverage compared to previous years, indicating potential challenges in achieving higher profitability.
- There is uncertainty in the global market, including geopolitical risks and potential government decisions, which could impact PepsiCo Inc (PEP)'s performance.
- The North American market is experiencing a muted top-line growth environment, posing challenges for PepsiCo Inc (PEP) to drive significant growth in this region.
- Currency fluctuations, particularly the strengthening of the dollar, are expected to be a headwind, impacting PepsiCo Inc (PEP)'s financial performance.
