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

Zacks Equity Research

In the latest trading session, PepsiCo (PEP) closed at $129.05, marking a -0.72% move from the previous day. This move lagged the S&P 500's daily gain of 0.85%. Meanwhile, the Dow gained 0.77%, and the Nasdaq, a tech-heavy index, added 1.08%.

Heading into today, shares of the food and beverage company had gained 2.81% over the past month, outpacing the Consumer Staples sector's gain of 0.84% and the S&P 500's loss of 2.06% in that time.

Investors will be hoping for strength from PEP as it approaches its next earnings release, which is expected to be July 9, 2019. The company is expected to report EPS of $1.50, down 6.83% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $16.42 billion, up 2.08% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.51 per share and revenue of $66.52 billion, which would represent changes of -2.65% and +2.88%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for PEP. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about 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 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 has moved 0.05% higher within the past month. PEP currently has a Zacks Rank of #2 (Buy).

Looking at its valuation, PEP is holding a Forward P/E ratio of 23.59. This represents a premium compared to its industry's average Forward P/E of 23.3.

We can also see that PEP currently has a PEG ratio of 3.37. 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. The Beverages - Soft drinks industry currently had an average PEG ratio of 2.18 as of yesterday's close.

The Beverages - Soft drinks industry is part of the Consumer Staples sector. This industry currently has a Zacks Industry Rank of 156, which puts it in the bottom 40% 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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