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On Thursday, Piper Sandler reiterated its Overweight rating on Pepsico (NASDAQ:PEP) stock with a price target of $167.00, as the company progresses with its North America integration strategy. Currently trading at $145.81, near its 52-week low, PepsiCo maintains a strong market position with a $200 billion market capitalization. According to InvestingPro analysis, the stock appears slightly undervalued based on its proprietary Fair Value model. Pepsico is currently implementing a new price pack architecture for its Frito-Lay North America (FLNA) division, which has shown promising trends in areas where it’s been introduced. The full rollout across all outlets is expected to be completed by May or June of this year.
The integration of Pepsico’s beverage and snack divisions, Pepsi Beverage North America (PBNA) and FLNA, is anticipated to yield cost savings starting in the second half of 2025. The combined operations are also projected to enhance commercial flexibility through shared mixing centers. However, the full benefits of this integration may take up to five or six years to materialize fully. The company’s impressive 54.89% gross profit margin and substantial annual revenue of $91.85 billion provide a strong foundation for this strategic initiative. InvestingPro subscribers can access 12 additional key insights about PepsiCo’s financial health and growth potential.
In addition, Pepsico has plans to significantly increase the revenues of Siete, a consumer brand under its umbrella. The company believes it can boost Siete’s sales to around $1 billion leveraging its distribution network, a substantial increase from the current estimated revenues of approximately $375 million.
Despite these positive developments, Piper Sandler has made slight adjustments to its earnings per share (EPS) estimates for Pepsico. The 2025 EPS forecast has been revised from $8.31 to $8.28, and the 2026 EPS prediction from $8.99 to $8.96, mainly due to an expected rise in interest expense for both years. Nevertheless, the firm has chosen to maintain the $167 price target for Pepsico stock. The company maintains a robust 3.72% dividend yield and has raised its dividend for 52 consecutive years, demonstrating strong shareholder commitment. For detailed analysis and comprehensive financial metrics, investors can access PepsiCo’s full research report on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, PepsiCo reported its fourth-quarter 2024 earnings, slightly surpassing earnings per share (EPS) expectations with a figure of $1.96, compared to the forecast of $1.95. However, the company’s revenue fell short, recording $27.78 billion against the expected $27.95 billion. In a move to enhance shareholder returns, PepsiCo announced a 7% increase in its quarterly dividend to $1.355 per share, aligning with a previous commitment to boost the annualized dividend. This dividend hike reflects the company’s strong financial performance, with nearly $92 billion in net revenue reported for 2024.
On the analyst front, Goldman Sachs maintained its Buy rating for PepsiCo, setting a price target of $175, citing the company’s strategic transformation and attractive valuation. Jefferies also retained a Buy rating but reduced the price target to $171, acknowledging challenges in the Frito-Lay division. Meanwhile, TD Cowen adjusted its price target to $150, maintaining a Hold rating, following PepsiCo’s guidance for low single-digit organic sales growth in 2025. These developments highlight the mixed reactions from analysts, with varying expectations for PepsiCo’s future performance.
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