Truist analyst Bill Chappell raised the firm’s price target on PepsiCo to $135 from $130 but keeps a Hold rating on the shares. The company’s Q3 earnings well above expectations with organic sales growth of 4.2% and its FY20 guidance was reinstated above the Street estimates, the analyst tells investors in a research note. Chappell notes however that PepsiCo’s results at this point are “largely macro-driven” by “elevated” retail consumer demand in the U.S., warning that its international business will remain “choppy” by region.
Morgan Stanley analyst Dara Mohsenian raised the firm’s price target on PepsiCo to $158 from $155 and “strongly” reiterates an Overweight rating on the shares as the company’s “sparkling” Q3 results highlight what he sees as the attractiveness of the company’s business model. Mohsenian sees Pepsi’s exposure to the salty snacks category providing attractive long-term growth and sees it having a defensive business relative to beverage peers, the analyst tells investors. Given Pepsi’s advantageous positioning, Mohsenian also sees a potential long-term market share benefit for Pepsi post-COVID in both snacks and beverages, the analyst added.
UBS analyst Sean King raised the firm’s price target on PepsiCo to $146 from $140 and keeps a Neutral rating on the shares after its Q3 earnings and updated FY20 guidance. The company performed with “executional prowess”, weathering the challenges of the first half of 2020 relatively better than its peers without having to step back from investing in future growth opportunities, the analyst tells investors in a research note. King adds however that at a multiple of 24-times expected next 12-month earnings, the risk-reward on PepsiCo shares looks balanced.
PepsiCo on Thursday reported its quarterly sales grew by more than 5% as consumers bought more of its Tostitos and pancake mixes.
The food and beverage giant also provided an outlook for its earnings and revenue for the first time since yanking its forecast in April, when coronavirus pandemic lockdowns hit sales.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Earnings per share: $1.66, adjusted, vs. $1.49 expected
Revenue: $18.09 billion vs. $17.23 billion expected
Pepsi reported fiscal third-quarter net income of $2.29 billion, or $1.65 per share, up from $2.1 billion, or $1.49 per share, a year earlier. The company spent $147 million this quarter on costs associated with the coronavirus pandemic, like more expensive labor and buying personal protective equipment.
Excluding items, the company earned $1.66 per share, beating the $1.49 per share expected by analysts surveyed by Refinitiv.
Net sales rose 5.3% to $18.09 billion, topping expectations of $17.23 billion. Organic revenue, which strips out the impact of foreign currency, acquisitions and divestitures, grew 4.2% in the quarter.
Both its Frito-Lay and Quaker Foods businesses reported organic revenue growth of 6%, despite economies opening up and consumers feeling more comfortable leaving their homes. Frito-Lay saw higher sales in its Tostitos, Cheetos and Doritos, while Quaker Foods’ pasta and macaroni and cheese dishes reported double-digit sales growth.
Pepsi’s international business reported organic sales growth of 4%, fueled by higher demand for snacks. Laguarta said the company expects a longer recovery for its beverage business because of reinstated pandemic restrictions. For example, Spain said Tuesday it would lock down Madrid and surrounding areas because of a rise in Covid-19 cases. Still, Laguarta said that new local restrictions aren’t impacting the business as dramatically as in April and May.
For the remainder of fiscal 2020, Pepsi is now expecting organic revenue growth of 4%, in line with its prior outlook, and core earnings per share of $5.50, down 38 cents from its original forecast.