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PepsiCo (PEP) Gains As Market Dips: What You Should Know

Zacks Equity Research

PepsiCo (PEP) closed the most recent trading day at $134.76, moving +0.76% from the previous trading session. This move outpaced the S&P 500's daily loss of 0.32%. Meanwhile, the Dow lost 0.47%, and the Nasdaq, a tech-heavy index, lost 0.34%.

Coming into today, shares of the food and beverage company had gained 1.68% in the past month. In that same time, the Consumer Staples sector lost 1.42%, while the S&P 500 lost 4.64%.

Investors will be hoping for strength from PEP as it approaches its next earnings release, which is expected to be October 3, 2019. In that report, analysts expect PEP to post earnings of $1.50 per share. This would mark a year-over-year decline of 5.66%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $16.97 billion, up 2.93% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.51 per share and revenue of $66.63 billion, which would represent changes of -2.65% and +3.05%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for PEP. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. PEP is currently a Zacks Rank #2 (Buy).

Digging into valuation, PEP currently has a Forward P/E ratio of 24.26. Its industry sports an average Forward P/E of 21.89, so we one might conclude that PEP is trading at a premium comparatively.

Meanwhile, PEP's PEG ratio is currently 3.47. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Beverages - Soft drinks stocks are, on average, holding a PEG ratio of 2.6 based on yesterday's closing prices.

The Beverages - Soft drinks industry is part of the Consumer Staples sector. This group has a Zacks Industry Rank of 98, putting it in the top 39% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our 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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