On Tuesday, Pepsico (NASDAQ:PEP)’s stock performance was anticipated to face a negative reaction due to its fourth-quarter earnings report, which, despite surpassing analyst expectations, presented a softer outlook for 2025. Currently trading at $150.27, near its 52-week low, InvestingPro data shows analyst targets ranging from $148 to $195, with Citi analyst Filippo Falorni maintaining a Buy rating and a $195.00 price target. The stock appears slightly undervalued according to InvestingPro’s Fair Value model, suggesting potential upside opportunity despite near-term challenges.
Pepsico reported a fourth-quarter organic sales growth (OSG) of 2.1%, which was slightly under the Visible Alpha consensus of 2.2% but above Citi’s estimate of 1.7%. The company’s earnings per share (EPS) for the quarter came in at $1.96, exceeding both the consensus of $1.94 and Citi’s forecast of $1.92. With impressive gross profit margins of 54.88% and a strong track record of 52 consecutive years of dividend increases, Pepsico maintains solid fundamentals despite guidance falling below its long-term growth algorithm. InvestingPro subscribers have access to 12 additional key insights about PEP’s financial health and growth prospects.
The company projects an organic sales growth of low single digits percentage (LSD%), compared to the consensus expectation of 3.1% and its previous algorithm of 4-6%. The EPS growth, excluding foreign exchange impacts, is expected to be in the mid-single digits percentage (MSD%), which is less than the high single digits percentage (HSD%) previously projected by the company’s algorithm. The all-in EPS growth is also forecasted to be in the LSD%, which is below the consensus prediction of 4.7%. This conservative outlook has prompted five analysts to revise their earnings estimates downward, as tracked by InvestingPro’s comprehensive financial monitoring system.
North American segments, including Frito-Lay North America (FLNA), Pepsi Beverages North America (PBNA), and Quaker Foods North America (QFNA), continued to underperform, missing consensus in all categories. However, international performance was more positive, with all international segments, except for Asia Pacific (APAC), beating consensus estimates.
The fourth-quarter EPS beat was driven primarily by lower selling, general and administrative (SG&A) expenses and a lower tax rate. These factors were partially offset by softer gross margins and higher interest expenses. Despite the earnings beat, the guidance for 2025 suggests that challenges persist, particularly in North American markets, leading to the expectation of a negative market reaction on Tuesday.
In other recent news, PepsiCo has been the subject of several significant developments. The company reported a modest revenue growth of 0.33% over the last twelve months, with Piper Sandler maintaining an Overweight rating on the stock and a steady price target of $171.00. PepsiCo has also been sued by the US Federal Trade Commission under the rarely invoked Robinson-Patman Act, a law that prohibits price discrimination against retailers.
On the expansion front, PepsiCo recently acquired Siete Foods for $1.2 billion, marking a strategic move to grow within the health-conscious food industry sector. Deutsche Bank (ETR:DBKGn) upgraded PepsiCo shares from Hold to Buy, adjusting the price target to $184 from $179, while Evercore ISI revised PepsiCo’s stock price target to $160, citing the need for growth in the U.S. market and potential impacts of health policies as challenges.
Piper Sandler and UBS both anticipate improved financial performance for PepsiCo in 2025, with EPS estimates for fiscal year 2025 at $8.50 and for 2026 at $9.10. Finally, PepsiCo announced a 7% increase in its quarterly dividend to $1.355 per share, following a strong financial performance with net revenue surpassing $91 billion in 2023. These are the recent developments for PepsiCo.
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