PepsiCo Could Scale to Fresh Record High on Upbeat Q2 Earnings; Target Price $156

The Harrison, New York-based global food and beverage leader PepsiCo is expected to report its second-quarter earnings of $1.53 per share, which represents year-over-year growth of over 15% from $1.32 per share seen in the same quarter a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue of $17.91 billion. In the last four consecutive quarters, on average, the company which holds approximately a 32% share of the U.S. soft drink industry has delivered an earnings surprise of over 6%.

“On average, analysts expect that PepsiCo will report full-year earnings of $6.05 per share for the current fiscal year, with EPS estimates ranging from $5.91 to $6.13. For the next year, analysts expect that the firm will post earnings of $6.54 per share, with EPS estimates ranging from $6.34 to $6.77,” noted analysts at ZACKS Research.

PepsiCo’s better-than-expected results, which will be announced on Tuesday, July 13, would help the stock hit new all-time highs.

Analyst Comments

“We expect 2Q21 PepsiCo (PEP) EPS of $1.54, 2 cents above the $1.52 Eikon consensus. We forecast +7.9% y-o-y organic sales growth in 2Q21, above the Visible Alpha consensus of +7.3%, as PEP cycles an easy comparison of -0.3% in 2Q20, which was negatively impacted by COVID-19-related closures in the on-premise business. We could see upside to our already above-consensus organic sales growth estimate as we only assume 2-Yr average organic sales growth of +3.8% in 2Q21, which seems conservative vs. +5.2% in 1Q21 and +4.5% in 2020,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We expect PepsiCo (PEP) operating margins to be up modestly (MSe +10 bps YoY) due to an expected yoy GM decline (MSe -100 bps YoY), driven by lower-margin acquisitions, partially offset by a -110 bps YoY expected decline in SG&A as % of sales on the moderation of COVID-19 related costs (which were $378M in the year ago quarter, worth 210 bps on margins), although we expected higher A&P investment in the business.”

PepsiCo Stock Price Forecast

Nine analysts who offered stock ratings for PepsiCo in the last three months forecast the average price in 12 months of $156.00 with a high forecast of $165.00 and a low forecast of $149.00.

The average price target represents 5.25% from the last price of $148.22. From those nine analysts, four rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $165 with a high of $194 under a bull scenario and $104 under the worst-case scenario. The firm gave an “Overweight” rating on the beverage company’s stock.

Several other analysts have also updated their stock outlook. JP Morgan lowered the target price to $154 from $155. Deutsche Bank raised the price target to $149 from $147. Credit Suisse lifted the price target to $155 from $144. Cowen and company upped the price target to $165 from $162. Citigroup increased the price objective to $162 from $161.

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