PepsiCo Earnings: Sharper Focus on Value and Away-From-Home Channels to Buoy US Performance
We plan to maintain our $176 fair value estimate for wide-moat PepsiCo after absorbing its second-quarter results. Organic sales rose 2% led by international expansion while EPS rose 13% benefiting from cost savings and a lower tax rate. Despite near-term headwinds from the Quaker recalls and consumer belt-tightening in the US, we think PepsiCo remains poised to bolster its competitive standing in beverages and snacks by leveraging marketing and product initiatives. We are maintaining our 2024 forecasts for sales and EPS to grow by 4% and 7%, respectively, as well as our 10-year projection for 5% sales CAGR and 17% average operating margins. Shares look undervalued.