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Tuesday, shares of Pepsico (NASDAQ:PEP) remained under scrutiny as RBC Capital Markets maintained their Sector Perform rating and a $163.00 price target. Trading near its 52-week low at $143.14, the $195.52B beverage and snack giant faces a challenging quarter ahead, with InvestingPro data showing 12 analysts recently revising earnings estimates downward.
The RBC Capital Markets analyst highlighted concerns over Pepsico’s sluggish revenue growth in North America, particularly within the snacking segment. With overall revenue growth at just 0.42% over the last twelve months, despite maintaining impressive gross profit margins of 54.89%, this trend is expected to continue, potentially impacting earnings.
According to RBC Capital, Pepsico’s upcoming quarterly results, due April 24, could reflect these challenges, with the firm’s projections falling below consensus estimates. For deeper insights into PepsiCo’s valuation and financial health metrics, investors can access the comprehensive Pro Research Report available on InvestingPro. The analyst suggests that the current difficulties could lead Pepsico to meet only the lower end of their guidance range for the year, or possibly fall slightly below it.
Pepsico’s financial outlook is being closely watched by investors, as the company navigates a period marked by volume pressures in its North American market. Trading at a P/E ratio of 20.18, RBC Capital’s assessment points to a cautious stance on the stock, with expectations set for a potentially subdued financial performance in the near term.
In other recent news, PepsiCo has been the subject of multiple analyst reports and strategic developments. JPMorgan analyst Andrea Teixeira adjusted the earnings per share estimate for PepsiCo’s first quarter to $1.49, aligning with consensus, but slightly increased the full-year EPS estimate to $8.32. The analyst also revised the Organic Sales Growth estimates downward due to a softer performance in the Frito-Lay North America segment and a conservative outlook for International sales. Meanwhile, Jefferies analyst Kaumil Gajrawala lowered PepsiCo’s price target to $165, maintaining a Hold rating, citing challenges in the Frito-Lay division and potential delays in cost savings.
PepsiCo also made a strategic move by acquiring Poppi, a prebiotic soda brand, as part of its efforts to expand its carbonated soft drink portfolio. UBS analyst Peter Grom maintained a Buy rating with a $175 price target for PepsiCo, highlighting the acquisition as a positive step towards meeting consumer demand for healthier options. On the regulatory front, PepsiCo, along with other beverage companies, faced potential challenges as a proposal to ban the purchase of soda with food stamps gained traction. This development has raised concerns about the potential impact on sales if the ban is implemented.
Additionally, Barclays (LON:BARC) analyst Lauren Lieberman downgraded PepsiCo’s rating to Equal Weight and lowered the price target to $156, emphasizing the importance of volume recovery in the Frito-Lay North America division. Lieberman suggested that while near-term challenges exist, PepsiCo’s international momentum and productivity initiatives offer long-term growth potential. These recent developments paint a picture of a company navigating both strategic opportunities and market challenges in a complex economic landscape.
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