On Thursday, Deutsche Bank (ETR:DBKGn) upgraded shares of Pepsico (NASDAQ:PEP) from Hold to Buy, adjusting the price target to $184 from $179. The upgrade comes as the stock trades near its 52-week low at $156.77, with a market capitalization of $217.59 billion.
According to InvestingPro data, nine analysts have recently revised their earnings expectations downward for the upcoming period. The revision comes despite acknowledging various challenges faced by the company, including a lackluster performance in North America and specific issues within its profitable Frito-Lay North America (FLNA) segment, as well as ongoing market share and volume concerns in its Pepsi Beverages North America (PBNA) division.
The analyst noted that Pepsico's international business, while still outperforming, had experienced a slowdown that fell short of expectations in the previous quarter. Additionally, the company had to contend with the lingering effects of a production disruption in its Quaker Foods North America (QFNA) segment from last year.
Despite these obstacles, Deutsche Bank's analyst believes that the risks are now "fully appreciated and more than adequately discounted" in the stock's valuation. The firm points out that Pepsico's stock is trading at less than 20 times the forecasted no-growth earnings per share (EPS) for the fiscal year 2024, indicating that the current share price has factored in the challenges. The company maintains impressive gross profit margins of 54.88% and offers a dividend yield of 3.46%.
Pepsico's stock upgrade reflects a confidence that the company's current valuation offers an attractive entry point for investors, considering the issues it has been facing are well recognized in the market. This perspective suggests that any potential upside could be significant if Pepsico manages to overcome its current hurdles.
The new price target of $184 suggests a modest increase in the stock's value, providing a more optimistic outlook for Pepsico's financial performance.
InvestingPro analysis suggests the stock is currently undervalued, with over 10 additional exclusive insights available to subscribers. Investors and market watchers will be closely monitoring the company's progress in addressing the mentioned challenges and capturing growth opportunities, especially in its international operations.
In other recent news, PepsiCo, a major player in the beverage industry, has seen several developments. The company announced a 7% rise in its quarterly dividend to $1.355 per share, continuing its trend of consistent dividend payments since 1965. This decision comes after the company reported a robust financial performance, with net revenue surpassing $91 billion in 2023.
PepsiCo, along with Eastman Chemical (NYSE:EMN), Dow, and LyondellBasell, has been navigating a decrease in demand for recycled plastic. These companies are strategically investing in chemical recycling technologies for various plastics. Despite these challenges, PepsiCo has managed to maintain impressive gross profit margins, demonstrating its operational efficiency.
Analysts from Jefferies, HSBC (LON:HSBA), and JPMorgan (NYSE:JPM) have provided their perspectives on PepsiCo. Jefferies has maintained a Buy rating, while HSBC raised its price target and retained a Hold rating. JPMorgan also adjusted its price target for PepsiCo, maintaining a Neutral stance following the company's Q3 2024 earnings release.
Wells Fargo (NYSE:WFC) reiterated an Equal Weight rating on PepsiCo, projecting a 1.7% increase in organic sales for 2024 and a 3.2% increase for 2025. The firm's 2024 EPS estimate for PepsiCo is $8.15, with a projected 6.8% year-over-year increase in EPS to $8.71 for 2025.
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