On Tuesday, Goldman Sachs (NYSE:GS) reaffirmed its confidence in Pepsico (NASDAQ:PEP), maintaining a Buy rating and a $195.00 price target for the stock. The endorsement comes despite Goldman Sachs adjusting its estimates for Pepsico lower ahead of the company's second-quarter results, set to be released on July 11, 2024. The revision in estimates is attributed to weaker-than-expected scanner data in the company's North America Beverages (PBNA) and Frito-Lay North America (FLNA) segments during the quarter.
The firm anticipates that the upcoming quarterly results may show softer growth, a scenario that is already widely anticipated by the market. Despite this, the analyst expressed optimism about the company's prospects, particularly in international markets. An improving consumer environment in Europe is expected to contribute to Pepsico's continued international strength, potentially mitigating slower growth in the United States.
Goldman Sachs' outlook for Pepsico remains positive, with the expectation that the company will meet its full-year 2024 (FY24) guidance. The firm's stance is based on the belief that Pepsico is very well positioned for long-term success. This perspective is held despite the prospect of a less robust performance in the second quarter.
Pepsico's strategy and positioning are key factors in Goldman Sachs' continued recommendation. With the second-quarter earnings report on the horizon, investors are looking to see how the company's performance aligns with the adjusted expectations and whether international growth can indeed balance the softer domestic results as predicted.
In other recent news, PepsiCo has seen significant developments in both financial and operational fronts. Deutsche Bank (ETR:DBKGn) recently revised its outlook on PepsiCo shares, lowering the price target from $185 to $180 and maintaining a Hold rating. This adjustment comes amidst concerns over sluggish U.S. consumption trends, particularly in PepsiCo's Frito-Lay North America division, and potential risks posed by recent devaluations in Latin American currencies.
The company has also been making strategic moves, including a 7% increase in its quarterly dividend, marking the 52nd consecutive annual rise. In addition, PepsiCo has agreed to waive a change of control clause in its bottling arrangements with Britvic (LON:BVIC), potentially paving the way for Carlsberg (CSE:CARLb)'s prospective acquisition of the British soft drinks maker.
Analysts at Jefferies have also adjusted their outlook on PepsiCo shares, raising the price target to $211 from $209 and maintaining a Buy rating. The firm anticipates that with new management's focus on margin prioritization, PepsiCo's North America Beverages margins could begin to see a positive turn.
Furthermore, David Trone, the congressional representative for Maryland's 6th district, has sold off a portion of his PepsiCo stocks held in an Insurance Trust, valued between $50,001 and $100,000. These recent developments highlight the dynamic environment in which PepsiCo operates and the ongoing efforts of the company to navigate these challenges.
InvestingPro Insights
The recent analysis by Goldman Sachs on Pepsico (NASDAQ:PEP) underscores the importance of understanding the company's financial health and market position. To complement this, InvestingPro offers additional insights. Pepsico has demonstrated an impressive streak in raising its dividend, doing so for 51 consecutive years, which is indicative of its commitment to returning value to shareholders. Additionally, the company boasts strong gross profit margins, standing at 54.15% over the last twelve months as of Q1 2024, reflecting efficient operations and significant market power within the Beverages industry.
From a valuation standpoint, Pepsico is trading at a P/E ratio of 22.73, suggesting a reasonable price relative to near-term earnings growth when compared to the industry average. This is further supported by a PEG ratio of 0.63, indicating potential undervaluation based on expected growth rates. Moreover, with a market capitalization of $230.06 billion, Pepsico remains a prominent player, and analysts predict the company will maintain profitability this year.
For investors considering Pepsico’s stock, these metrics may offer a broader perspective on the company's financial stature and market valuation. For more detailed analysis and additional InvestingPro Tips, including the company’s ability to cover interest payments and its moderate level of debt, visit https://www.investing.com/pro/PEP. There are 11 additional tips available on InvestingPro, providing a comprehensive outlook. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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