On Tuesday, Jefferies adjusted its price target for Pepsico (NASDAQ:PEP) shares, reducing it to $200 from the previous $210 while continuing to endorse the stock with a Buy rating.
The firm's analysis acknowledges that Pepsico is not shielded from the current downturn in the snacking sector. This has led to a downward revision of Frito's 2024 sales growth expectations to 2%, slightly below the market consensus of 2.5%.
The report further notes an increase in promotional activities by Pepsico, which has yielded positive results, suggesting that the company is experiencing some pressure. The year 2024 is beginning to shape up as a consolidation year for Pepsico.
Despite these challenges, Jefferies remains optimistic about the company's prospects, citing that prices are unlikely to fall back to levels seen before the recent inflationary period. This pricing strength is expected to support Pepsico's margin story, which has remained flat since 2022.
Jefferies points out that Pepsico's shares are currently trading at 18 times forward-year 2 earnings (FY2 P/E), which is viewed as an attractive entry point when compared to the five-year average of approximately 23 times. The firm's stance indicates a belief in the long-term value of Pepsico despite the short-term headwinds faced by the company and the broader snacking industry.
In summary, the investment firm's revised price target reflects a modest adjustment in response to market conditions and company-specific factors. However, the maintained Buy rating suggests confidence in Pepsico's ability to navigate through the current challenges and capitalize on its pricing power to maintain profitability.
In other recent news, PepsiCo has experienced a series of analyst adjustments and strategic developments. BofA Securities lowered its price target for PepsiCo to $190, citing concerns about persistent soft demand in the food and beverage industry. Despite the reduced target, the firm maintains a Buy rating on the company's stock, highlighting PepsiCo's longer-term earnings stability.
TD Cowen also adjusted its outlook, reducing its price target for PepsiCo shares to $190 due to an unexpected downturn in the U.S. salty snacks sector. Despite this, the firm maintained a Buy rating, acknowledging PepsiCo's consistent value generation and robust management. Goldman Sachs (NYSE:GS) kept its Buy rating on PepsiCo, setting a $195 price target, despite lowering estimates due to weaker-than-expected performance in North American segments.
Deutsche Bank (ETR:DBKGn) revised its outlook, lowering the price target from $185 to $180 and maintaining a Hold rating, due to sluggish U.S. consumption trends and potential risks from Latin American currency devaluations.
On the other hand, Jefferies raised its price target to $211 from $209, maintaining a Buy rating, and anticipating positive margins in PepsiCo's North America Beverages.
PepsiCo also increased its quarterly dividend by 7%, marking the 52nd consecutive annual rise. Furthermore, the company agreed to waive a change of control clause in its bottling arrangements with Britvic (LON:BVIC), potentially facilitating Carlsberg (CSE:CARLb)'s prospective acquisition of the British soft drinks maker. These are the latest developments in a series of strategic moves and analyst adjustments that have recently shaped PepsiCo's financial landscape.
InvestingPro Insights
Amidst the market's fluctuating dynamics, Pepsico (NASDAQ:PEP) stands out with its impressive track record and financial health. According to InvestingPro data, Pepsico boasts a robust market capitalization of $222.88 billion and a gross profit margin that impressively stands at 54.15% for the last twelve months as of Q1 2024. These figures underscore the company's strong position within the Beverages industry—a sector where Pepsico is a prominent player, as one of the InvestingPro Tips highlights.
InvestingPro Tips also reveal that Pepsico has consistently raised its dividend for 51 consecutive years, showcasing a commitment to shareholder returns even in challenging times. Additionally, the company's P/E ratio is currently at 24.35, with an even more attractive adjusted P/E ratio of 22.02 for the last twelve months as of Q1 2024. This suggests that Pepsico is trading at a low P/E ratio relative to near-term earnings growth, offering potential value for investors.
For investors seeking further insights and tips on Pepsico, there are 12 additional InvestingPro Tips available, which can be accessed by signing up for the service. To enhance your investment strategy and gain comprehensive analysis, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With these insights, investors can make informed decisions based on real-time data and expert financial analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
PEP: is this perennial leader facing new challenges?
With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Sure, there are always opportunities in the stock market – but finding them feels more difficult now than a year ago. Unsure where to invest next? One of the best ways to discover new high-potential opportunities is to look at the top performing portfolios this year. ProPicks AI offers 6 model portfolios from Investing.com which identify the best stocks for investors to buy right now. For example, ProPicks AI found 9 overlooked stocks that jumped over 25% this year alone. The new stocks that made the monthly cut could yield enormous returns in the coming years. Is PEP one of them?
Unlock ProPicks AI to find out