PepsiCo (NYSE: PEP) is set to release its Q1 2024 results on April 23, with expected adjusted revenues of $18.2 billion and earnings of $1.55 per share on an adjusted basis, slightly higher than consensus estimates. The company is likely to continue benefiting from pricing initiatives, particularly for smaller size variants, and our analysis suggests that there is still room for growth in PepsiCo’s stock. Trends that are expected to drive PepsiCo’s results include better pricing trends in the latest quarter, but a weak consumer spending environment may impact overall performance. The company has guided for at least 4% organic sales growth in 2024, with reported sales growth likely to be lower due to the strengthening of the U.S. dollar.
PepsiCo’s stock performance in recent years has seen fluctuations, with a 15% increase from early 2021 to around $170 currently, compared to a 35% increase for the S&P 500 over the same period. Returns for PEP stock were 17% in 2021, 4% in 2022, and -6% in 2023, underperforming the S&P in 2021 and 2023. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, outperformed the S&P 500 each year over the same period, providing better returns with less risk. Given the current uncertain macroeconomic environment, there is speculation on whether PEP will see a strong jump or underperform the S&P over the next 12 months. From a valuation perspective, there is potential for growth, with a projected valuation of $186 per share based on a 23x P/E multiple.
In the previous quarter, PepsiCo saw a 4.5% organic revenue growth in Q4’23, driven by a 9% increase in pricing offsetting a 4% decline in volume. Revenues on a GAAP basis were down 0.5%, with strong performance in Europe and favorable foreign currency impacting sales in Africa, the Middle East, and South Asia. Despite adverse currency translation in Latin America, segment sales were up 8%. The company’s adjusted operating margin improved 97 bps year-over-year to 11.4% in Q4, leading to a 7% y-o-y rise in the bottom line to $1.78 on an adjusted basis.
While PepsiCo’s stock has potential for growth, it is important to consider how its peers perform on key metrics. Comparisons with other companies across industries can provide valuable insights. As the company prepares to report its Q1 2024 results, there is anticipation around how it will navigate the current economic environment and whether it can sustain growth in the face of challenges such as weak consumer spending. The outlook for PepsiCo’s stock remains positive, with potential for further growth based on pricing initiatives and organic sales growth projections for the year. It will be interesting to see how the company’s results impact its stock performance and how it compares to its peers in the consumer staples sector.
