PepsiCo (NYSE: PEP) is set to report its Q2 2024 results on July 11, with revenues expected to reach $22.8 billion and earnings at $2.15 per share. The company is anticipated to benefit from better pricing initiatives, especially for smaller size variants, leading to a strong performance in Q2. Despite the solid outlook, the stock still has room for growth, with analysts projecting a valuation of $186 per share, indicating a 13% upside potential from the current level of around $162.
In recent years, PepsiCo’s stock performance has been quite volatile, with marginal gains from early 2021 to now. The company has underperformed the S&P 500 in 2021 and 2023, with returns of 17%, 4%, and -6%, compared to the index’s 27%, -19%, and 24% returns over the same period. The Trefis High Quality Portfolio, on the other hand, has consistently outperformed the S&P 500, showcasing better returns with less risk compared to individual stocks and benchmark indexes.
Despite the uncertain macroeconomic environment with high oil prices and elevated interest rates, PepsiCo could see a strong jump in performance or face challenges in the next 12 months. From a valuation perspective, the stock has potential for growth, with an estimated valuation of $186 per share based on a 23x P/E multiple and expected earnings of $8.15 per share for the full year 2024. The company’s previous quarter revenue of $18.25 billion saw organic growth of 3%, driven by a 5% rise in pricing offsetting a 2% decline in volume.
Looking ahead to the latest quarter, PepsiCo is expected to benefit from better pricing trends but may face challenges from a weak consumer spending environment. The Quaker Foods segment, impacted by a product recall in the previous quarter, may continue to face headwinds. The company has guided for at least 4% sales growth on an organic basis in 2024, but achieving this target could be difficult given the overall decline in volumes and market conditions.
While PepsiCo’s stock shows potential for growth, it is important to consider how the company’s peers are performing on key metrics. Investors can explore valuable comparisons across industries at Peer Comparisons. Overall, PepsiCo’s upcoming earnings report will provide insight into the company’s performance in Q2 2024 and its outlook for the rest of the year.
