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PepsiCo (PEP) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, PepsiCo (PEP) closed at $131.36, marking a +0.24% move from the previous day. This change lagged the S&P 500's 0.43% gain on the day. At the same time, the Dow added 0.5%, and the tech-heavy Nasdaq gained 0.75%.

Wall Street will be looking for positivity from PEP as it approaches its next earnings report date. This is expected to be July 13, 2020. On that day, PEP is projected to report earnings of $1.25 per share, which would represent a year-over-year decline of 18.83%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $15.68 billion, down 4.65% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $5.32 per share and revenue of $67.59 billion. These totals would mark changes of -3.8% and +0.64%, respectively, from last year.

Any recent changes to analyst estimates for PEP should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. PEP is currently sporting a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that PEP has a Forward P/E ratio of 24.62 right now. Its industry sports an average Forward P/E of 24.01, so we one might conclude that PEP is trading at a premium comparatively.

Investors should also note that PEP has a PEG ratio of 5.01 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Beverages - Soft drinks stocks are, on average, holding a PEG ratio of 5.01 based on yesterday's closing prices.

The Beverages - Soft drinks industry is part of the Consumer Staples sector. This industry currently has a Zacks Industry Rank of 94, which puts it in the top 38% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow PEP in the coming trading sessions, be sure to utilize Zacks.com.


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