PepsiCo (PEP, Financial) shares experienced a significant drop today, falling by 5.19% amid mixed first-quarter results and a lowered earnings forecast. The decline is attributed to increased supply chain costs due to tariffs and diminishing consumer spending in a volatile economic landscape. The current stock price is $134.88.
In the first quarter, PepsiCo reported revenues of $17.9 billion, marking a 1.8% decrease from the same period last year. However, this figure surpassed the consensus estimate of $17.7 billion. Despite a slight beat in revenue, the adjusted earnings per share (EPS) of $1.48 fell short of Wall Street's estimate of $1.49. The North American division showed a 1% decrease in domestic food business volume and a 3% decline in the beverage segment.
Management has raised concerns regarding rising supply chain costs, exacerbated by tariffs and ongoing economic uncertainties. CEO Ramon Laguarta warned of increased supply chain expenses and weakened consumer conditions across many markets, which may obscure the company's outlook.
As a consequence of these challenges, PepsiCo has revised its 2025 outlook to project "low-single-digit organic revenue growth" and anticipates core constant currency EPS to remain flat compared to the previous year, down from the earlier "mid-single-digit growth" expectations.
PepsiCo is making efforts to address potential supply chain disruptions and higher costs, though detailed strategies have not been disclosed. The company sources a significant portion of its concentrate for North American soda sales from Ireland, subject to a 10% tariff, and faces potential impacts from a 25% tariff on aluminum.
From an investment perspective, PepsiCo (PEP, Financial) is currently valued at a PE ratio of 19.41, which is near its 5-year low. The company holds a strong Altman Z-Score of 3.74, indicative of financial stability. Despite the recent challenges, PepsiCo's stock is indicated as "Modestly Undervalued" with a GF Value of $182.95. Furthermore, with a price-to-book (PB) ratio of 10.26 and a dividend yield that is close to a 10-year high, the stock remains attractive for dividend-focused investors. PepsiCo's forward outlook continues to face pressure, but its diversified product portfolio and strong market position in snacks and beverages provide a foundation for long-term growth potential.
