Key Takeaways
- JPMorgan lowered PepsiCo’s rating to Neutral from Overweight, slashing the price target to $138 from $170—a 19% reduction.
- Deutsche Bank similarly reduced its stance to Hold from Buy earlier in the week, marking the beverage giant’s second downgrade in mere days.
- Shares of PEP dipped approximately 1% during premarket hours following JPMorgan’s announcement.
- Wall Street voices concern that PepsiCo‘s North American turnaround has lost momentum amid escalating transportation and operational expenses.
- The company is scheduled to unveil Q3 financial results on October 8 before market open.
Shares of PepsiCo (PEP) experienced a decline of roughly 1% in early premarket activity Monday after JPMorgan issued a downgrade on the beverage and snack food giant. Trading hovered around the $128.50 mark.
JPMorgan’s Andrea Teixeira revised her outlook on PepsiCo, moving from Overweight to Neutral. Accompanying this rating change, she slashed the price objective by 19%, bringing it down to $138 from the previous $170 target.
This marks PepsiCo’s second rating cut within the same week. Deutsche Bank moved its recommendation to Hold from Buy on Monday, simultaneously reducing its target price to $138 from $155.
According to Teixeira, the company’s North American recovery efforts have hit a wall while operational expenses continue their upward trajectory. She highlighted persistent weakness throughout both the salty snacks segment and broader food divisions.
Domestic Market Challenges Persist
The Frito-Lay North America division has implemented numerous strategic adjustments throughout the year. Management initiatives have encompassed recipe modifications, redesigned packaging, increased advertising expenditures, and competitive pricing strategies.
Yet despite these comprehensive efforts, revenue expansion remains anemic. Teixeira noted the turnaround momentum “appears to have stalled” since the opening quarter of 2026.
PepsiCo Foods North America has demonstrated modest signs of recovery. However, Teixeira suggested this uptick appears more closely correlated with macroeconomic tailwinds than company-specific operational excellence.
Global markets have delivered stronger performance throughout the year. Beneficial weather patterns combined with the FIFA World Cup provided meaningful revenue support.
Teixeira cautioned these tailwinds are temporary. When accounting for these non-recurring factors, she emphasized that domestic market performance continues falling below management’s stated objectives.
Profit Projections Reduced
JPMorgan adjusted its 2027 earnings per share forecast downward to $8.86 from $9.05. The firm’s 2028 projection was similarly trimmed to $9.33 from $9.57.
These revised estimates trail the Street consensus of $8.95 and $9.47 respectively. Teixeira indicated PepsiCo will likely depend heavily on manufacturing efficiencies and expense management to achieve the bottom end of its 5% to 7% earnings growth targets.
Emerging transportation expenses are creating additional headwinds entering the final quarter. Teixeira also reduced her Q3 organic revenue growth projection to 2.8% from 3.2%.
Her third quarter earnings estimate now stands at $2.29, decreased from $2.31. She attributed the adjustment to softer domestic consumer patterns and disappointing retail tracking data.
Teixeira observed that PepsiCo’s current valuation of approximately 15 times earnings now aligns with industry comparables. She suggested a valuation expansion could materialize if management demonstrates consistent volume improvement within FLNA.
Deutsche Bank’s Steve Powers expressed comparable sentiments Monday. He acknowledged diminished confidence in PepsiCo’s North American strategic roadmap, noting that recent turnaround initiatives have yielded inconsistent or fleeting outcomes.
PepsiCo will announce its third quarter financial performance before trading begins on October 8.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
