PepsiCo (PEP) Earnings Spotlight: Buy or Hold Considerations

NASDAQ: PEP | PepsiCo, Inc. News, Ratings, and Charts

PEP – Given PepsiCo’s (PEP) proactive investments in innovation and infrastructure to address evolving consumer demands and strengthen its market position, is now the opportune time to invest in PEP, or is it wiser to await further developments as the company reports its earnings this week? Let’s find out…

Snacks and soda maker PepsiCo, Inc. (PEP) is poised to reveal its fiscal 2023 fourth-quarter earnings on February 9. Analysts anticipate a 1.3% year-over-year revenue upswing to $28.37 billion and a 3.1% increase in EPS to $1.72 for the quarter.

Additionally, on January 31, PepsiCo Beverages North America (PBNA) inaugurated a 150,000-square-foot warehouse in Lisbon, Wisconsin, fortifying its dedication to meet escalating demand. With a six-decade presence, PBNA aims to bolster local operations, innovate for regional clients, and engage with community leaders.

Furthermore, on January 29, PEP’s Rockstar Energy Drink introduced Rockstar Focus, the latest addition to its expanding energy portfolio. Engineered to deliver energy and heightened mental clarity, Rockstar Focus blends avant-garde ingredients with caffeine, establishing a new industry benchmark and enriching the consumer experience.

That being said, PEP has strategically invested in its brands, manufacturing capacity, go-to-market systems, supply chain, and technology to modernize operations. This endeavor aims to propel organic revenue and core constant currency EPS growth toward the upper echelons of long-term targets, aligning with the vision to lead globally with pep+.

For full-year 2023, PEP foresees a 13% increase in core constant currency EPS, surpassing the previous forecast of 12%, along with a continued anticipation of a 10% rise in organic revenue. The upbeat projections underscore PEP’s dedication to sustainable growth and market dominance, laying a robust groundwork for its ambitious vision.

Shares of PEP have gained 2.8% over the past three months to close the last trading session at $171.42.

Here are the financial aspects of PEP that could influence its price performance in the near term:

Strong Financials

During the fiscal 2023 third quarter that ended September 9, 2023, PEP’s net revenue rose 6.7% year-over-year to $23.45 billion. Its operating profit grew 19.7% from the year-ago value to $4.01 billion. Furthermore, net income and net income per common share attributable to PEP increased 14.4% and 14.9% from the prior year’s period to $3.09 billion and $2.24, respectively.

Solid Historical Growth

Over the past three years, PEP’s revenue and EBITDA increased at CAGRs of 10.2% and 8.8%, respectively. Its net income and EPS grew at respective CAGRs of 5.6% and 5.9% over the same time frame. In addition, the company’s total assets rose at a CAGR of 2.8% during the period.

Optimistic Analyst Estimates

The consensus revenue estimate of $92.14 billion for the fiscal year that ended December 2023 indicates a 6.7% year-over-year increase. Likewise, the consensus EPS estimate of $7.55 for the same period exhibits an 11.3% rise from the prior year. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters.

Furthermore, analysts predict PEP’s revenue and EPS to grow 4.6% and 7.9% year-over-year to $96.41 billion and $8.15, respectively, for the fiscal year ending December 2024.

Robust Profitability

The stock’s trailing-12-month gross profit margin of 54.03% is 60.5% higher than the 33.66% industry average. Its trailing-12-month EBITDA margin of 17.60% is 50.7% higher than the 11.68% industry average. Moreover, the stock’s trailing-12-month net income margin of 9.05% is 83.3% higher than the 4.94% industry average.

POWR Ratings Exhibit Solid Prospects

PEP’s sound outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PEP has an A grade for Quality, which corresponds to its higher-than-industry profitability measures. In addition, the stock has a B grade for Growth, supported by its consistently strong performance in the past.

PEP is ranked #12 out of 33 stocks in the B-rated Beverages industry. Click here to access PEP’s Value, Momentum, Stability, and Sentiment ratings.

Bottom Line

Targeted investments in innovation and infrastructure are propelling PEP’s upward trajectory. Notably, expansions such as PBNA’s warehouse and the introduction of Rockstar Focus underscore the company’s dedication to adapting to consumer demands, solidifying its market dominance, and actualizing its ambitious global growth vision.

Furthermore, with the company’s robust financial performance in the last reported quarter, strong profitability, and optimistic projections, investing in PEP appears wise.

How Does PepsiCo, Inc. (PEP) Stack Up Against Its Peers?

While PEP has an overall grade of B, equating to a Buy rating, you may check out these A-rated (Strong Buy) stocks within the Beverages industry: Coca-Cola FEMSA, S.A.B. de C.V. (KOF), Coca-Cola Consolidated, Inc. (COKE), and Primo Water Corporation (PRMW). To explore more Beverages stocks, click here.

What To Do Next?

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PEP shares were trading at $172.53 per share on Wednesday morning, up $1.11 (+0.65%). Year-to-date, PEP has gained 1.58%, versus a 4.72% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
PEPGet RatingGet RatingGet Rating
KOFGet RatingGet RatingGet Rating
COKEGet RatingGet RatingGet Rating
PRMWGet RatingGet RatingGet Rating

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Given PepsiCo’s (PEP) proactive investments in innovation and infrastructure to address evolving consumer demands and strengthen its market position, is now the opportune time to invest in PEP, or is it wiser to await further developments as the company reports its earnings this week? Let’s find out...

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