PepsiCo Stock Falls On Q2 Revenue Miss, Revised Outlook: What to Know

PepsiCo (PEP) stock is down by more than 1% at the start of trading Thursday after the snack food and beverage giant reported mixed results for its second quarter and revised its full-year revenue outlook.

In the 12 weeks ended June 15, PepsiCo’s revenue increased 0.8% year-over-year to $22.5 billion as volumes declined 4% and 3%, respectively, in its Frito-Lay and PepsiCo Beverages segments in North America. Its earnings per share (EPS) increased 9.1% to $2.28 from the year-ago period.

“During the second quarter, our business delivered net revenue growth, strong gross and operating margin expansion and double-digit EPS growth, remaining agile despite facing difficult net revenue growth comparisons versus the prior year, subdued category performance within North America convenient foods and the impacts associated with certain product recalls at Quaker Foods North America,” PepsiCo CEO Ramon Laguarta said in a statement.

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The results were mixed compared with analysts’ expectations. According to CNBC, Wall Street was anticipating revenue of $22.6 billion and earnings of $2.16 per share.

As a result of its soft performance in the first half, PepsiCo revised its full-year revenue guidance. It now expects organic revenue growth of 4% versus its previous guidance of growth of at least 4%. It reiterated its expectation for core EPS of at least $8.15, an increase of 7% from the prior year.

“For the balance of the year, we will further elevate and accelerate our productivity initiatives and make disciplined commercial investments in the marketplace to stimulate growth,” Laguarta said. 

Is Pepsi stock a buy, sell or hold?

Wall Street is bullish on the consumer staples stock. According to S&P Global Market Intelligence, the average analyst target price for PEP stock is $183.51, representing implied upside of about 14% to current levels. Additionally, the consensus recommendation is a Buy.

Financial service firm CFRA is one of the more bullish outfits on PEP stock with a Buy rating and $200 price target.

“Notably, volumes were higher across both product types across the Europe, Africa, Middle East, and South Asia markets, helping offset weakness in North America, where Beverage volumes were -3% and Frito-Lay was -4%,” CFRA vice president and senior equity analyst Garrett Nelson said in a note following the earnings release. 

“Gross margin expanded 120 bps to 55.9% (90 bps ahead of consensus). Despite a second consecutive beat, PEP merely maintained full-year EPS guidance of at least $8.15, which compares to the $8.16 consensus. We continue to believe PEP is just being conservative, but think some investors might view it as a red flag.”

CFRA’s $200 price target represents implied upside of more than 24% to current levels.

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