PepsiCo’s (PEP) organic sales growth is expected to bottom in Q1 and “rapidly inflect” in the rest of the year back to above consensus forecasts, as well as relative to peers, Morgan Stanley said Monday in a report.
The brokerage upgraded its rating on the beverage and snacks company’s stock to overweight from equal-weight and named it as its top pick, both in beverages and overall. PepsiCo replaced Constellation Brands (STZ) as a top pick in beverages and Colgate-Palmolive (CL) as an overall top pick, Morgan Stanley said.
Morgan Stanley said it had downgraded PepsiCo’s stock amid concern its valuation was “priced to perfection and consensus/PEP guidance on [organic sales growth] was clearly too high with an unrealistic volume rebound as pricing dissipated.”
“Both of these issues have now played out,” the report said. Morgan Stanley’s price target on PepsiCo is $190.
The company’s shares rose 3.9% in recent trading Monday.