On Friday, Piper Sandler maintained an Overweight rating on Pepsico (NASDAQ:PEP) stock with a steady price target of $171.00. The research firm's focus was on the company's potential rebound in 2025, particularly through its Doritos brand. According to InvestingPro analysis, PepsiCo appears undervalued at current levels, with impressive gross profit margins of nearly 55%. Pepsico's recent shift to a more disciplined promotional strategy in the latter part of 2024 has led to increased sales, volume, and market share gains for Doritos.
Pepsico had experienced a period of weak momentum, especially in its Frito-Lay North America (FLNA) division during the third quarter of 2024, due to heavy discounting that did not yield the desired results. The challenges are reflected in the company's modest revenue growth of 0.33% over the last twelve months. However, the company's adjustment to its promotional activities in the fourth quarter showed signs of positive performance. This change in strategy, according to Piper Sandler, could signal a broader application of these successful promotional techniques across Pepsico's product portfolio.
Pepsico's other large brands within the FLNA segment have continued to face challenges, impacting the division's overall performance. Despite these struggles, the success with Doritos provides a glimmer of hope. Piper Sandler suggests that the insights gained from the Doritos campaign could lead to improved guidance for the company's 2025 financial targets, potentially surpassing current expectations.
The research firm's commentary highlights the importance of Pepsico's promotional sensibilities and their impact on the company's future growth. As Pepsico prepares for 2025, the application of the Doritos playbook could be a key factor in driving the company's top and bottom line beyond what has been anticipated or feared by the market. With earnings due in just 4 days, investors can access comprehensive analysis and 12 additional key insights through InvestingPro's detailed research reports, which cover what really matters for this $210 billion beverage giant.
In other recent news, PepsiCo has experienced a series of significant developments. 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. The firm also adjusted its earnings per share (EPS) estimate for fiscal year 2025 to $8.50, down from $8.65, and projected an EPS growth of about 7% to $9.10 for fiscal year 2026.
In the meantime, UBS maintained a Buy rating on PepsiCo's stock with a steady price target of $175. The firm's forecast for the fourth quarter's EPS for fiscal year 2024 aligns with the consensus among analysts at $1.94.
PepsiCo is also facing a lawsuit from the US Federal Trade Commission under the rarely invoked Robinson-Patman Act, a law that prohibits price discrimination against retailers.
In terms of expansion, 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 Piper Sandler initiated coverage on PepsiCo shares, assigning an Overweight rating and setting a price target of $171.00.
Lastly, 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 that investors may find noteworthy.
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