PepsiCo Earnings: Innovation and Productivity Gains Fuel Profit Growth; Shares No Bargain

We plan to raise our fair value estimate for wide-moat PepsiCo by a low-single-digit percentage after digesting better-than-expected second-quarter results driven by snack and beverage innovations, brand investments, and productivity gains. Organic revenue grew 13% and core EPS was up 15%, both edging our estimates (12% and 13%, respectively). The firm revised up 2023 organic revenue and EPS growth guidance to 10% (from 8%) and 12% (from 9%), respectively, which we view as attainable, and we plan to tick up our own 2023 forecast to approximate the updated outlook. Our 10-year projections for mid-single-digit sales growth and high-single-digit EPS expansion remain in place. We see shares trading at a slight premium to our fair value estimate after the planned increase, and suggest investors wait for a better entry point.