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PepsiCo (PEP) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

PepsiCo (PEP) closed at $137.92 in the latest trading session, marking a +1.06% move from the prior day. The stock outpaced the S&P 500's daily gain of 0.49%. At the same time, the Dow added 0.28%, and the tech-heavy Nasdaq gained 0.43%.

Coming into today, shares of the food and beverage company had gained 1.91% in the past month. In that same time, the Consumer Staples sector gained 3.1%, while the S&P 500 gained 2.9%.

PEP will be looking to display strength as it nears its next earnings release, which is expected to be February 13, 2020. The company is expected to report EPS of $1.43, down 4.03% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $20.36 billion, up 4.3% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.50 per share and revenue of $66.81 billion, which would represent changes of -2.83% and +3.32%, respectively, from the prior year.

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

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

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. Over the past month, the Zacks Consensus EPS estimate has moved 0.02% lower. PEP is currently sporting a Zacks Rank of #4 (Sell).

In terms of valuation, PEP is currently trading at a Forward P/E ratio of 24.8. For comparison, its industry has an average Forward P/E of 23.07, which means PEP is trading at a premium to the group.

Also, we should mention that PEP has a PEG ratio of 3.55. 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 2.18 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 156, putting it in the bottom 39% 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.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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