BofA Securities has adjusted its outlook on Pepsico (NASDAQ:PEP) shares, lowering the price target from the previous $190.00 to $185.00, while still endorsing the stock with a Buy rating.
The revision comes amid concerns regarding Pepsico's performance in the North American market, where the company has experienced ongoing challenges in both its Snacks and Beverages segments.
The analyst from BofA Securities noted that the revised price target reflects lowered earnings estimates for fiscal years 2024 and 2025.
The adjustment is based on the expectation of continued weakness in consumption trends within the relevant categories, as well as market share losses that Pepsico has been facing.
The forecast for the company's organic revenue growth has been set at 1.0% for the third quarter of 2024 and 3.1% for the full year of 2025.
In terms of earnings per share (EPS), the analyst now anticipates Pepsico to report $8.00 for fiscal year 2024 and $8.45 for fiscal year 2025. These figures represent a decrease of approximately 1.5% from the previous estimates.
Despite this downgrade, the analyst highlighted that the company's management of selling, general, and administrative (SG&A) expenses could provide a buffer against earnings risk.
In other recent news, Pepsico's third-quarter earnings are on the horizon, and Goldman Sachs has adjusted its outlook in anticipation, reducing the price target from $195 to $192 while maintaining a Buy rating.
The firm cites challenges in the company's North America Beverages and Frito-Lay North America segments as reasons for the revision. Pepsico's international performance, however, is expected to offset slower domestic growth.
Pepsico has made significant changes in its bylaws to comply with recent U.S. Securities and Exchange Commission regulations, including the adoption of the "universal proxy card" rules.
The company has also seen a transition in the CFO position and is increasing its focus on the rapidly expanding Indian market. Pepsico has boosted its quarterly dividend by 7% to $1.35 per share, marking the 52nd consecutive annual dividend increase.
Despite the departure of Deputy CFO, Jim Lee, BNP Paribas (OTC:BNPQY) Exane has maintained a neutral rating on Pepsico. The company, along with Unilever (LON:ULVR), is shifting its focus to India to mitigate slower recovery in China. Pepsico has issued Senior Notes totaling $2.25 billion, generating net proceeds of approximately $2.23 billion for general corporate purposes.
InvestingPro Insights
While BofA Securities has adjusted its outlook on PepsiCo, recent data from InvestingPro offers additional context to the company's financial position. PepsiCo's market capitalization stands at $233.51 billion, reflecting its significant presence in the beverage and snack industry. The company's revenue for the last twelve months as of Q2 2024 reached $92.05 billion, with a modest growth of 2.13% over the same period.
An InvestingPro Tip highlights that PepsiCo has raised its dividend for 51 consecutive years, demonstrating a strong commitment to shareholder returns. This is particularly relevant given the analyst's concerns about market challenges, as it suggests the company's long-term financial stability. Additionally, PepsiCo boasts impressive gross profit margins, which stood at 54.64% for the last twelve months as of Q2 2024, potentially providing some cushion against the earnings risks mentioned in the BofA Securities report.
Another InvestingPro Tip notes that PepsiCo operates with a moderate level of debt, which could be advantageous as the company navigates through the current market challenges and potential need for restructuring, as alluded to in the analyst's report.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for PepsiCo, providing a broader perspective on the company's financial health and market position.
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