Companies and Brands

What Analysts Are Saying About PepsiCo After Earnings

Chris Lange

Published: July 10, 2019 1:25 pm

Last Updated: January 30, 2020 6:48 pm

When PepsiCo Inc. (NYSE: PEP) released its second-quarter financial results before the markets opened on Tuesday, investors were not particularly impressed with the results. Analysts seemed to hold a similar sentiment.

24/7 Wall St. has included some highlights from the earnings report, as well as what analysts are saying about PepsiCo after the fact.

The firm said that it had $1.54 in earnings per share (EPS) and $16.45 billion in revenue. That compares with consensus estimates that called for $1.50 in EPS and $16.42 billion in revenue, as well as the $1.61 per share and $16.09 billion posted in the same period of last year.

Looking ahead to the 2019 full year, the company expects to see organic revenue growth of 4% and a decline in core constant currency EPS of roughly 1% (core EPS of $5.50). Consensus estimates call for $5.53 in EPS and $66.51 billion in revenue.

Merrill Lynch reiterated a Buy rating and raised its price target to $142 from $135. The brokerage firm believes that PepsiCo is committed to fiscal 2019 being an investment year and, as a result, any operating upside is expected to be re-invested. The firm’s fiscal 2019 to 2021 EPS estimates remain unchanged at $5.50, $5.92 and $6.36, respectively.

Merrill gave its investment rationale as follows:

We believe that Pepsi has the resources and plans to balance consistent investment, growth and returns. Given recent management changes, we see a possibility of changes in thinking on Pepsi’s portfolio (splits, spins, bottler refranchising) and other strategic items to enhance investor returns.

CFRA reiterated a Buy rating and raised its price target to $145 from $140. Its report detailed:

Our EPS estimates remain $5.60 for ’19 and $6.00 for ’20. Pepsi posts Q2 adjusted EPS of $1.54 vs. $1.61 (-4.3%), ahead of the $1.51 consensus. Net revenue increased 2.2% as a negative fx impact was more than offset by organic revenue growth of 4.5%, driven by Frito-Lay North America (+5%), Latin America (+10%) and other emerging markets. Pepsi maintained full-year EPS guidance of $5.50, which we continue to view as conservative. We remain bullish on the future of Pepsi under the leadership of its new chairman and CEO, who we forecast will deliver more robust EPS growth and more generous cash returns to shareholders. While the stock’s valuation appears fair to even full on near-term earnings estimates, looking out a few years, we think Pepsi is capable of generating north of $7/share in earnings and, on that basis, consider the stock inexpensive at current levels

Here’s what a few other analysts had to say following earnings:

• Morgan Stanley reiterated its Overweight rating but raised its price target to $143 from $137.
• UBS maintained a Neutral rating but lifted its target price to $132 from $130.
• Though Credit Suisse reiterated its Underperform rating, it also raised its target, to $110 from $106.

Shares of PepsiCo were last seen up about 1% at $133.36, in a 52-week range of $104.53 to $135.24. The consensus price target is $127.84.

24/7 Wall St.
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