J.P. Morgan analyst Andrea Teixiera downgraded PepsiCo to Neutral from Overweight and trimmed her target price by 19% to $138, citing weak North American trends and pressure in the salty snacks division. Teixiera expects PepsiCo to lean more heavily on production to meet full-year EPS guidance, but said that is probably not enough to offset weak North American markets, and she lowered her FY27 EPS estimate to $8.86 from $9.05 and her FY28 EPS estimate to $9.33 from $9.57. She noted PepsiCo's international business performed well this year on favorable weather and a strong FIFA World Cup, but excluding those non-recurring tailwinds, North America likely continued to underperform management's expectations, especially at Frito-Lay North America, where ingredient and packaging reformulation along with lower prices failed to meaningfully bolster sales. Ahead of PepsiCo's Q3 results, due before the open on October 8, Teixiera cut her organic sales growth and EPS estimates to +2.8% and $2.29 from +3.2% and $2.31, reflecting softer North American expectations, weaker-than-expected track channel data and consumer headwinds, partially offset by gains in international markets. She added that further downside is limited given the current valuation of 15x P/E, roughly in line with peers, and that a re-rating is possible if management can show more consistent volume improvement in Frito-Lay North America similar to Q1.
PepsiCo IncJ.P. Morgan downgraded PepsiCo to Neutral and cut its target price 19% to $138, lowering EPS estimates on weak North American trends.
JPMorgan Chase & Co