Proactive Investors - PepsiCo (NASDAQ:PEP) Inc (NASDAQ:PEP, ETR:PEP) faces negative sentiment going into its second quarter earnings report which is not expected to represent a meaningful positive catalyst for the beverage giant, analysts at UBS believe.
The analysts see Pepsi posting earnings per share (EPS) of $2.15, in line with the consensus.
“Our conversations would suggest sentiment remains negative heading into results,” they wrote in a note to clients.
“Most investors believe that the underperformance vs. large-cap multinational peers over the last year has created an attractive entry point.
“However, the fundamental backdrop remains challenging as US trends continue to decline year-over-year, and while international performance is likely a key offset, organic growth will likely be towards the low end of large-cap multinational peers for calendar Q2, leading some investors to question whether the full-year sales outlook is achievable.”
The analysts do not expect Pepsi to make any changes to its 2024 guidance with US trends yet to show meaningful improvement.
“While most believe Pepsi has ample flexibility in SG&A to hit the company's constant-currency EPS target of +8%, many are questioning whether the company needs to lower their organic sales outlook for ‘at least’ +4% growth,” they wrote.
“At this stage, we believe the base case expectation is for Pepsi to soften the language around the guidance vs. taking the range below the company's long-term algorithm.”
They forecast 4% organic growth, below the Street’s 4.4% estimate, and EPS of $8.15.
In the longer term, the analysts see a path to improved performance, and view the stock’s entry point as attractive.
Pepsi shares closed at $162.60 on Wednesday. The analysts have a $200 price target on the stock and a ‘Buy’ rating.
The company will report its Q2 earnings on Thursday, July 11 before the stock market opens.