PepsiCo Stock Has Gone Nowhere This Year. Why Earnings Could Change That.

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Pepsi will release its profits report later this month.

Getty Images/Tim Boyle

PepsiCo

According to J.P. Morgan, will disclose second-quarter earnings later this month, and the results will likely be solid. This might lead to a boost in the beverage behemoth’s full-year forecast. Pepsi (ticker: PEP) received an Overweight rating from analyst Andrea Teixeira, although her price objective was reduced to $154 from $155. However, she is optimistic about the upcoming report, raising her earnings-per-share forecast to $1.52 from $1.44.

She expects the company to post excellent revenues, as it recovers from a tiny drop in the previous quarter, which was led by Covid-19. Pepsi’s organic sales growth increased by 2.4 percent in the previous quarter, and Teixeira expects it to increase by 7.7 percent this quarter—possibly even more given the accelerated reopening in North America. “Following a solid first quarter (versus the worst comparisons of the year), an easy lap in the second quarter, and additional improvement projected in the second half of 2021, we believe Pepsi is well positioned to deliver double-digit core constant currency earnings per share,” Teixeira writes.

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She expects Pepsi will earn $6.13 per share for the full year, a few cents higher than the consensus. A successful second-quarter performance could force Pepsi to raise its guidance, but she points out that it will depend on whether the firm decides to invest more money on marketing to maintain its top-line growth. In recent trading, Pepsi stock was little changed, rising 0.1 percent to $148.33. The stock has risen 11.5 percent in the last year, but is essentially flat for the year. Even while the company’s prior earnings report, released in April, was better than expected, it did little to affect the stock, despite other analysts becoming more enthusiastic. To contact the editors at Barron’s, send an email to editors@barrons.com./nRead More