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On Thursday, Jefferies analyst Kaumil Gajrawala adjusted the price target for Pepsico (NASDAQ:PEP) shares, bringing it down to $165 from the previous target of $170. The firm has decided to maintain its Hold rating on the stock. According to InvestingPro data, PepsiCo is currently trading near its 52-week low at $148.11, with seven analysts recently revising their earnings estimates downward. Gajrawala’s assessment pointed to recent challenges faced by the company’s Frito-Lay division, noting a 5% decline in the last four weeks ending March 8. Despite maintaining strong gross profit margins of 54.89%, the analyst expressed concerns that Pepsico’s cost savings might not materialize for a few months.
Gajrawala also highlighted that Pepsico is expected to unveil a new, more substantial productivity plan later in the year. The anticipated charges related to this plan have been revised upward, from $3.7 billion to $6.2 billion through 2030. This increase follows the company’s digitalization efforts, which, according to the analyst, are not unusual.
The report further mentioned the current issues with U.S. volumes, suggesting that the pressure on the top-line could persist if the situation does not improve. With annual revenue of $91.85B and a current dividend yield of 3.66%, Gajrawala’s commentary reflected a cautious outlook, indicating that while the company is working on its productivity, it may take time to see the benefits. The Hold rating was maintained as the analyst awaits further developments. For deeper insights into PepsiCo’s financial health and growth potential, including exclusive ProTips and comprehensive analysis, visit InvestingPro.
In other recent news, PepsiCo has announced its acquisition of the prebiotic soda brand Poppi for $1.95 billion, aligning with the rising demand for healthier beverage options among younger consumers in the U.S. The deal, which includes $300 million in anticipated cash tax benefits, effectively lowers the net purchase price to $1.65 billion. This acquisition is part of PepsiCo’s strategy to diversify its product portfolio with health-oriented beverages. In related developments, UBS analyst Peter Grom reaffirmed a Buy rating for PepsiCo stock with a $175 price target, citing the company’s strategic moves to enhance its carbonated soft drink portfolio. Meanwhile, Barclays (LON:BARC) analyst Lauren Lieberman downgraded PepsiCo’s stock rating from Overweight to Equal Weight, adjusting the price target to $156 due to concerns over the near-term performance of the Frito-Lay North America division. Despite these concerns, Barclays expressed confidence in the division’s potential for sustainable growth in the longer term. These developments reflect PepsiCo’s ongoing efforts to adapt to consumer preferences and market conditions.
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