Consumer Staples

The key debate around PepsiCo remains on 2025 and whether its investments on value and promotions can lead to an acceleration in organic sales growth, particularly at Frito, while still driving earnings per share growth on algorithm, Citi analyst Filippo Falorni says in a research note. The beverage giant should see a gradual improvement in organic sales growth to 2.7% in 2025 from 2% in 2024, with slightly below-algo 2025 earnings per share growth on reinvestment, Falorni says. Citi raises its 2024 EPS estimates to $8.14 from $8.10 previously, and its 2025 EPS views to $8.55 from $8.50.

PepsiCo’s (PEP) third-quarter financial results are not expected to see a “material” upside to projections, while its full-year organic sales outlook could face some pressure amid continued sluggish domestic trends, RBC Capital Markets said Friday. The beverage and snacks company is scheduled to report third-quarter results Tuesday. RBC lowered its adjusted earnings expectations to $2.28 a share from $2.31 and its revenue outlook to $24.02 billion from $24.34 billion. Wall Street is looking for $2.30 and $24 billion, respectively. “We are expecting (PepsiCo’s) quarter to look like recent prints, with modest topline results and in-line to slightly better EPS, and don’t see material upside overall,” RBC co-Head of Global Consumer and Retail Research Nik Modi said in a note to clients. The company’s international business is once again expected to lead the growth amid “muted” domestic trends,” Modi wrote. Although Frito volumes have improved sequentially, they’re still not “overly robust”

Pepsi seems to be facing growing investor pressure, with its 2024 organic revenue guidance close to potentially proving to be aspirational, UBS analysts say in a research note. The embedded improvement in trends isn’t playing out as many would have anticipated, the analysts say. There are also questions as to whether the maker of soft drinks and owner of snack brands such as Lay’s and Doritos will need to pull additional levers to drive an improvement in volume consumption, which may result in greater investment/lower bottom line growth looking ahead, the analysts add. Shares fall 0.6% to $167.45.

The following is a summary of the PepsiCo, Inc. (PEP) Q2 2024 Earnings Call Transcript: Financial Performance: PepsiCo’s overall productivity and cost reduction efforts have enabled them to reinvest in growth strategies, particularly in the second half of 2024. International markets reported 7% growth in the first half of the year, and this growth rate is expected to continue. The U.S. market encountered slight growth challenges, particularly in Frito-Lay North America due to softer volume results. Business Progress: Quaker is expected to recover its supply chain by Q4 2024, which will significantly boost its operations and sales. Investments in international markets continue to yield positive results, expected to maintain growth momentum. Strategic marketing and localized product innovations, particularly in China, are enhancing PepsiCo’s competitive edge. Opportunities: Continued expansion and investments in international markets are projected to sustain growth. Increased marketing, particularly in the North American beverage segment, aims to bolster

PepsiCo’s 2Q results were soft as expected with weak volume trends in North America, leading to a lowered organic revenue growth outlook. Despite the cut not being major, it’s not de-risked, as it still implies a strong acceleration in the second half of the year that will be largely dependent on an improvement in the North America business, Citi analyst Filippo Falorni says in a research note. “Given U.S. scanner data trends remain soft, we expect investors will continue to question the implied second-half topline guidance and maintain a negative short-term view,” Falorni says.