On Tuesday, Goldman Sachs adjusted its outlook on Pepsico (NASDAQ:PEP) shares, lowering the price target to $192 from $195, while reaffirming a Buy rating on the stock. The revision comes as the firm anticipates Pepsico's third-quarter earnings, which are scheduled for release on October 8.
The lowered estimates by Goldman Sachs are a response to perceived challenges Pepsico faced in the most recent quarter, including weaker sales data in both its North America Beverages (PBNA) and Frito-Lay North America (FLNA) segments. This is attributed to a combination of consumer behavior, which includes a shift towards private label products within the salty snacks category, and overall volume and market share pressures in a tough consumer environment.
Despite these domestic headwinds, the financial institution expresses a cautious optimism that Pepsico's international performance could help mitigate the slower growth expected in the U.S. market. In light of these factors, Goldman Sachs has revised its sales and earnings per share (EPS) projections for the third quarter, as well as for the fiscal years 2024 and 2025.
The analyst also mentioned concerns regarding the achievability of Pepsico's organic growth target of approximately 4% for the current year. It is anticipated that the company's management might slightly reduce this forecast in the upcoming third-quarter financial report.
Goldman Sachs continues to support a long-term positive outlook for Pepsico, citing the company's strong positioning. However, the price target has been adjusted, reflecting a more cautious stance in the near term.
In other recent news, PepsiCo has seen a series of significant events. The company has adapted its bylaws to align with recent changes in the U.S. Securities and Exchange Commission regulations, including the adoption of the "universal proxy card" rules.
PepsiCo has also experienced a change in the CFO position and has increased its focus on India, a rapidly expanding market. The company has increased its quarterly dividend by 7% to $1.35 per share, marking its 52nd consecutive annual dividend increase.
PepsiCo has issued Senior Notes totaling $2.25 billion, generating net proceeds of around $2.23 billion for general corporate purposes. Despite the departure of Deputy CFO, Jim Lee, BNP Paribas (OTC:BNPQY) Exane has maintained a neutral rating on PepsiCo. The company and Unilever (LON:ULVR) are shifting their focus to India, a rapidly expanding market, to mitigate slower recovery in China.
These are among the recent developments for PepsiCo. The company is adapting its governance practices to stay current with regulatory requirements and best practices for shareholder engagement. These changes are part of the company's ongoing efforts to enhance transparency and fairness in its operations.
InvestingPro Insights
As Pepsico gears up for its third-quarter earnings release, investors might consider the latest insights from InvestingPro to gauge the company's performance and prospects. Pepsico has demonstrated a consistent commitment to shareholder returns, having raised its dividend for 51 consecutive years, which aligns with Goldman Sachs' long-term positive outlook. Moreover, the company's gross profit margin stands impressively at 54.64% over the last twelve months as of Q2 2024, indicating strong profitability in its operations.
On the valuation front, Pepsico is trading at a P/E ratio of 24.86, suggesting a premium relative to near-term earnings growth. This is complemented by a PEG ratio of 1.2, which offers a broader perspective on the company's valuation considering its growth rate.
The company's stock has also shown low price volatility, which might appeal to investors seeking stability in uncertain market conditions. For those interested in deeper analysis, InvestingPro offers additional tips on Pepsico, providing a comprehensive understanding of its financial health and market position.
With a market cap of $236.41 billion and a robust dividend yield of 3.15%, Pepsico remains a prominent player in the beverages industry. The upcoming earnings report will be closely watched, and these InvestingPro metrics and tips could be crucial for investors looking to make informed decisions. For more detailed insights and tips, explore the full range of analysis available at InvestingPro.
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