PepsiCo Earnings: Innovation and Productivity Initiatives To Power Profit Growth; Shares No Bargain

We plan to raise our $170 fair value estimate for wide-moat PepsiCo by a low-single-digit percentage after absorbing better-than expected first-quarter results driven by snack and beverage innovations and strong in-market execution. Organic revenue grew 14% with strength across major geographical markets, and adjusted EPS (excluding one-time gain from juice assets divestiture in early 2022) rose 18%, both ahead of our estimates (10% and 12%, respectively). In light of the strong performance, we are ticking up our 2023 revenue growth forecast to 6.5% (from 4.8%) and adjust EPS growth to 9% (from 8.4%), though our 10-year projections for mid-single-digit top-line growth and high-single-digit EPS expansion remain unchanged. We see shares trading at a premium to our fair value estimate after the planned increase, and suggest investors wait for a better entry point.