Key takeaways
View moreDespite trading at a discount to industry EV/EBITDA multiples, PepsiCo's deteriorating fundamentals, including negative operating cash flow, working capital concerns, and high leverage, suggest the current valuation is not justified. The company's underperformance relative to peers, reduced guidance, and execution challenges in key segments like Frito-Lay North America indicate that the market has not fully priced in the operational risks and potential margin pressure ahead.
- PepsiCo's revenue growth is slowing, with the most recent trailing twelve month YoY growth at -0.38%, lower than both the 3-year CAGR of 4.22% and the 5-year CAGR of 6.07%.
- The company's liquidity position is weak, as indicated by a current ratio of 0.83, which is below the industry average of 1.96.
- PepsiCo's financial leverage is high, with a total debt to total equity ratio of 263.84%, significantly higher than the industry average of 124.69%.
- Net operating cash flow was negative at -973 million for the quarter ending March 31, 2025, raising concerns about the company's ability to generate cash from its operations.
- PepsiCo has underperformed the Consumer Staples Select Sector SPDR Fund (XLP), with a year-to-date performance of -12.48% compared to XLP's 2.54%.
- The company's enterprise value to sales ratio is higher than the industry average (2.62 vs. 2.14), indicating that the company may be overvalued relative to its sales.
- Management has reduced its full-year earnings outlook, citing tariffs, heightened macro and consumer uncertainty, and subdued performance from Frito-Lay North America.
- PepsiCo is facing lawsuits related to alleged plastic pollution, which could pose legal and reputational risks.
- The company is focused on international business growth, with continued investments in capacity, talent, go-to-market strategies, and brands.
Evaluation summary
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Company Overview:
- PepsiCo, Inc. is a global leader in the food and beverage industry, manufacturing, marketing, distributing, and selling a wide range of beverages, food, and snacks. Key products include brands like Lay's, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, and SodaStream. The company operates through six reportable segments: Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), PepsiCo Beverages North America (PBNA), Latin America (LatAm), Europe, Africa, Middle East, and South Asia (AMESA), and Asia Pacific, Australia and New Zealand, and China Region (APAC).
- The company's revenue is generated through various channels, including authorized bottlers, contract manufacturers, and other third parties. While specific revenue contributions by brand are not detailed in the provided data, the segment information indicates the relative importance of each geographic and product-based division.
- The benchmarks used for comparative analysis include the Consumer Staples Select Sector SPDR Fund (XLP), and the industry peers are Monster Beverage Corp. (MNST) and Coca-Cola Consolidated, Inc. (COKE).
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Financial Performance:
- PepsiCo's recent quarterly financial statements show fluctuating revenue. Revenue was 17.92 billion for the quarter ending March 31, 2025, compared to 27.78 billion for the quarter ending December 31, 2024, 23.32 billion for the quarter ending August 31, 2024, and 22.50 billion for the quarter ending June 30, 2024. This indicates a decreasing trend in revenue.
- Net income has also shown a decreasing trend, with 1.83 billion for the quarter ending March 31, 2025, compared to 1.52 billion, 2.93 billion, and 3.08 billion for the previous three quarters, respectively.
- The gross profit margin for the quarter ending March 31, 2025, was 55.66%, compared to 53.01%, 55.70%, and 56.06% for the previous three quarters. The net profit margin was 10.23% for the quarter ending March 31, 2025, compared to 5.48%, 12.57%, and 13.70% for the previous three quarters. The EBITDA margin was 19.97% for the quarter ending March 31, 2025, compared to 15.61%, 21.84%, and 22.23% for the previous three quarters.
- PepsiCo's Return on Average Assets (ROA) was 9.29%, Return on Average Total Equity (ROE) was 50.06%, and Return on Average Total Capital was 21.40% for the quarter ending March 31, 2025. These figures are higher than the industry averages of -0.37%, -3.21%, and 2.51%, respectively, indicating efficient use of assets and capital.
- Compared to industry averages, PepsiCo's gross profit margin (55.66% vs. 26.15%), net profit margin (10.23% vs. -2.32%), and EBITDA margin (19.97% vs. 6.93%) are significantly higher, demonstrating strong operational efficiency.
- The recent earnings call highlighted that the company reduced its full-year earnings outlook, citing tariffs, heightened macro and consumer uncertainty, and subdued performance from Frito-Lay North America.
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Operational Efficiency:
- Total assets have fluctuated, with 101.74 billion as of March 31, 2025, compared to 99.47 billion, 100.51 billion, and 99.53 billion for the previous three quarters. Total liabilities have also fluctuated, with 83.21 billion as of March 31, 2025, compared to 81.30 billion, 80.91 billion, and 79.95 billion for the previous three quarters.
- Working capital has been negative, with -5.22 billion as of March 31, 2025, compared to -5.77 billion, -3.46 billion, and -5.45 billion for the previous three quarters, indicating potential inefficiencies in managing current assets and liabilities.
- Net operating cash flow was negative at -973 million for the quarter ending March 31, 2025, compared to 6.29 billion, 4.91 billion, and 2.36 billion for the previous three quarters. Net investing cash flow was -1.23 billion for the quarter ending March 31, 2025, compared to -2.51 billion, -1.51 billion, and -892 million for the previous three quarters. Net financing cash flow was 1.77 billion for the quarter ending March 31, 2025, compared to -2.27 billion, -2.38 billion, and -2.91 billion for the previous three quarters.
- Free cash flow to equity was negative at -1.58 billion for the quarter ending March 31, 2025, compared to 3.82 billion, 3.76 billion, and 1.27 billion for the previous three quarters. The free cash flow margin was -0.09 for the quarter ending March 31, 2025, compared to 0.14, 0.16, and 0.06 for the previous three quarters.
- Total capital expenditure was 603 million for the quarter ending March 31, 2025, while depreciation, depletion, and amortization were 829 million.
- Cash dividends paid were 1.88 billion for the quarter ending March 31, 2025, indicating a commitment to returning value to shareholders.
- The current ratio was 0.83 as of March 31, 2025, which is below the industry average of 1.96, indicating potential liquidity issues. The quick ratio was 0.65 as of March 31, 2025, also below the industry average of 1.03.
- The total debt to total equity ratio was 263.84% as of March 31, 2025, significantly higher than the industry average of 124.69%, indicating higher financial leverage. The debt / EBITDA ratio was 2.69, lower than the industry average of 4.60, suggesting manageable debt levels relative to earnings.
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Growth Opportunities:
- The company is focused on international business growth, with continued investments in capacity, talent, go-to-market strategies, and brands.
- PepsiCo is also focused on portfolio transformation to offer consumers options that align with their dietary preferences, including protein, fiber, and hydration.
- The company is integrating its North America beverage and snack businesses to improve efficiency and drive growth.
- The acquisition of VNGR Beverage, LLC (poppi), a prebiotic soda brand, for $1.95 billion, indicates a strategic move to expand into healthier beverage options.
- PepsiCo is expanding and extending the 2019 Multi-Year Productivity Plan through 2030, with expected pre-tax charges of $6.15 billion, suggesting a focus on long-term efficiency and cost management.
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Recent Developments and Market Sentiment:
- Recent news and events indicate that PepsiCo is facing challenges, particularly with the performance of Frito-Lay North America, which is impacting the overall earnings outlook.
- The company's reduced full-year earnings outlook, citing tariffs, heightened macro and consumer uncertainty, and subdued performance from Frito-Lay North America, has likely negatively impacted market sentiment.
- Analysts are focused on the magnitude and durability of volume weakness in Frito-Lay North America and the need for more substantial reinvestment behind the brand.
- The acquisition of Poppi and plans for the brand are also of interest to analysts, as well as the drivers for PB&A margins and medium-term margin goals.
- The company's strategic initiatives, such as portfolio transformation and operational excellence, are being closely watched by analysts and investors.
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Risks and Threats:
- Key risks identified in company-specific risk assessments include reduction in future demand for products due to changing consumer preferences and macroeconomic conditions, damage to brand reputation or image, and product quality and safety issues.
- Industry risks include increased competition, regulatory changes, and supply chain disruptions.
- Competitive threats include international companies as well as regional, local, and private-label manufacturers.
- Regulatory risks include new or increased taxes and restrictions on certain ingredients or packaging.
- The company is facing lawsuits in New York, Baltimore, and Los Angeles related to alleged plastic pollution, which could pose legal and reputational risks.
- The earnings call highlighted the impact of tariffs and macroeconomic uncertainty on the company's profitability.
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Valuation Analysis:
- The enterprise value to EBITDA ratio was 13.34 for the quarter ending March 31, 2025, compared to 13.61, 15.66, and 14.82 for the previous three quarters. The enterprise value to sales ratio was 2.62 for the quarter ending March 31, 2025, compared to 2.71, 3.06, and 2.87 for the previous three quarters.
- Compared to industry averages, the enterprise value to sales ratio is higher (2.62 vs. 2.14), indicating that the company may be overvalued relative to its sales. The enterprise value to EBITDA ratio is lower than the industry average (13.34 vs. 22.86).
- Potential catalysts include successful turnaround of Frito-Lay North America, continued international business growth, and improved North American beverage margins.
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Price Performance:
- PepsiCo's stock price has shown a declining trend in recent months. The price decreased from 142.86 on April 11, 2025, to 129.96 on June 9, 2025.
- PepsiCo, Inc. (PEP) has generally underperformed the Consumer Staples Select Sector SPDR Fund (XLP) across all time periods analyzed. For instance, the year-to-date performance shows PEP at -12.48% compared to XLP at 2.54%, a difference of -15.02%. Similarly, over the past year, PEP's return was -25.14%, while XLP's was 6.17%, indicating a significant underperformance of -31.31%.
- PepsiCo, Inc. (PEP) has generally underperformed both Monster Beverage Corp. (MNST) and Coca-Cola Consolidated, Inc. (COKE) across various time periods, including Year-To-Date (YTD), 1 Week, 1 Month, 3 Months, 6 Months, 1 Year, 2 Years, and 3 Years. For example, the 3-year annualized return for PEP is -6.73%, while MNST's is 10.57% and COKE's is 31.11%.
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Future Outlook:
- Management has reduced its full-year earnings outlook, citing tariffs, heightened macro and consumer uncertainty, and subdued performance from Frito-Lay North America.
- The company's future performance will depend on its ability to successfully turn around Frito-Lay North America, continue international business growth, and improve North American beverage margins.
- The impact of tariffs and macroeconomic conditions will also play a significant role in the company's future performance.
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Summary:
- PepsiCo is a global leader in the food and beverage industry with a diverse portfolio of brands. However, the company is facing challenges, including slowing revenue growth, declining profitability, and potential liquidity issues.
- Strengths: Strong operational efficiency, commitment to returning value to shareholders, and strategic initiatives focused on growth and efficiency.
- Weaknesses: Slowing revenue growth, declining profitability, potential liquidity issues, and high financial leverage.
- Opportunities: International business growth, portfolio transformation, and integration of North America beverage and snack businesses.
- Threats: Increased competition, regulatory changes, supply chain disruptions, and macroeconomic uncertainty.
- Overall, PepsiCo's financial health is mixed, with strong operational efficiency offset by challenges in revenue growth, profitability, and liquidity. The company's future performance will depend on its ability to address these challenges and capitalize on its growth opportunities. Further monitoring is needed to assess the effectiveness of the company's turnaround strategies and its ability to navigate the changing market landscape. The company's valuation appears stretched relative to sales, and its price performance has lagged both benchmarks and peers.
Price history
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Fundamentals
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Insights
- PepsiCo's revenue growth is slowing, and profitability is declining, indicating potential challenges in the company's ability to grow its top line and maintain its bottom line.
- The company's liquidity position is weak, as indicated by the low current ratio and quick ratio, raising concerns about its ability to meet its short-term obligations.
- The company's financial leverage is high, as indicated by the high total debt to total equity ratio, increasing financial risk.
- The company's cash flow generation is inconsistent, with negative net operating cash flow and free cash flow in the most recent quarter, raising concerns about its ability to fund its growth initiatives and meet its debt obligations.
- Despite these challenges, PepsiCo demonstrates strong operational efficiency, as evidenced by its high gross profit margin, net profit margin, and EBITDA margin compared to industry averages.
Analysis
- Revenue
- Revenue has shown a decreasing trend in recent quarters, indicating potential challenges in generating growth.
- The most recent trailing twelve month YoY growth is -0.38%, which is lower than both the 3-year CAGR of 4.22% and the 5-year CAGR of 6.07%, suggesting a deceleration in revenue growth.
- The enterprise value to sales ratio is higher than the industry average, indicating that the company may be overvalued relative to its sales.
- Profitability
- Net income has shown a decreasing trend in recent quarters, indicating a decline in overall profitability.
- The return on average assets, return on average total equity, and return on average total capital are all higher than the industry average, indicating efficient use of assets and capital for generating profits.
- However, these profitability ratios have shown a decreasing trend in recent quarters.
- The gross profit margin, net profit margin, and EBITDA margin are all significantly higher than the industry average, indicating efficient production, cost management, and operations.
- Liquidity
- The current ratio and quick ratio are both lower than the industry average, indicating potential liquidity issues.
- Working capital has shown a decreasing trend in recent quarters.
- Solvency
- The total debt to total equity ratio is significantly higher than the industry average, indicating higher financial leverage and risk.
- The debt / EBITDA ratio is lower than the industry average, suggesting manageable debt levels relative to earnings.
- Operational Efficiency
- The company demonstrates strong operational efficiency, as evidenced by its high gross profit margin, net profit margin, and EBITDA margin compared to industry averages.
- However, these margins have shown a decreasing trend in recent quarters.
- Cash Flow Analysis
- Net operating cash flow has been inconsistent, with a recent negative value, raising concerns about the company's ability to generate cash from its operations.
- Free cash flow has also been negative in the most recent quarter, indicating that the company is not generating enough cash to cover its capital expenditures.
- Cash dividends paid have shown a steady increasing trend, indicating a commitment to returning value to shareholders.
- Risk Factors
- The company faces risks related to changing consumer preferences, increased competition, and macroeconomic conditions, which could impact revenue growth and profitability.
- High financial leverage, as indicated by the high total debt to total equity ratio, could increase financial risk.
- The negative net operating cash flow and free cash flow in the most recent quarter raise concerns about the company's ability to meet its debt obligations and fund its growth initiatives.
- Future Outlook
- The company's future outlook is uncertain, given the challenges in generating revenue growth, declining profitability, and potential liquidity issues.
- Monitoring key financial metrics such as revenue growth, profitability margins, cash flow, and debt levels will be crucial to assess the company's long-term financial performance.
- Management's ability to address the challenges in Frito-Lay North America and improve the margin of the North American beverage business will be critical for the company's future success.
- Profitability
Financial statements
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Public filings
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- PepsiCo maintains a diverse global portfolio of leading food and beverage brands, but faces intensifying competition and evolving consumer preferences that require ongoing innovation and adaptation.
- The company is navigating a challenging macroeconomic environment marked by high inflation, supply chain disruptions, and geopolitical tensions, which are impacting its operations and financial performance.
- PepsiCo is proactively investing in productivity improvements, portfolio transformation, and digital capabilities to enhance its competitiveness and position the business for long-term sustainable growth.
- Key risks include damage to brand reputation, product quality and safety issues, inability to attract and retain talent, water scarcity, retail landscape changes, and legal/regulatory challenges related to taxes, packaging, and environmental concerns.
- Despite these headwinds, PepsiCo's strong liquidity, access to capital, and ongoing strategic initiatives position the company to navigate the current environment and continue delivering value to shareholders.
Core Business and Operations:
- PepsiCo is a leading global food and beverage company with a diverse portfolio of brands including Lay's, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, and SodaStream
- The company operates through various channels, including authorized bottlers, contract manufacturers, and other third parties, to produce, market, distribute, and sell a wide array of beverages and convenient foods
- PepsiCo has operations in over 200 countries and territories, with its largest markets being the United States, Mexico, Russia, Canada, China, the United Kingdom, South Africa, and Brazil
- The company's operations are organized into six reportable segments: PepsiCo Foods North America, PepsiCo Beverages North America, International Beverages Franchise, Europe, Middle East and Africa, Latin America Foods, and Asia Pacific Foods
Industry and Market Trends:
- The food and beverage industry continues to be highly competitive, with PepsiCo facing competition from international companies as well as regional, local, and private-label manufacturers
- Changing consumer preferences, including increased focus on health and wellness, sustainability, and e-commerce, are driving industry trends
- Regulatory changes, such as new or increased taxes and restrictions on certain ingredients or packaging, are impacting the industry
- Macroeconomic factors, including inflation, supply chain disruptions, and geopolitical tensions, are creating operational challenges
Recent Events:
- Acquired the remaining 50% ownership in Sabra Dipping Company, making it a wholly-owned subsidiary
- Acquired Siete, a Mexican-American foods business, for $1.2 billion
- Entered into an agreement to acquire VNGR Beverage, LLC (poppi), a prebiotic soda brand, for $1.95 billion
- Expanded and extended the 2019 Multi-Year Productivity Plan through 2030, with expected pre-tax charges of $6.15 billion
Risk Factors:
- Reduction in future demand for products due to changing consumer preferences and macroeconomic conditions
- Damage to brand reputation or image
- Product quality and safety issues, including recalls
- Inability to compete effectively against competitors
- Failure to attract, develop, and retain a skilled workforce
- Water scarcity and climate change impacts
- Changes in the retail landscape and relationships with key customers
- Disruptions to manufacturing operations and supply chain, including increased commodity, packaging, transportation, and labor costs
- Volatile economic, political, and geopolitical conditions in international markets
- Imposition of new or increased taxes, regulations, or limitations on products and packaging
- Cybersecurity incidents and other information technology disruptions
- Failure to successfully complete or manage strategic transactions
Legal Matters:
- Facing lawsuits in New York, Baltimore, and Los Angeles related to alleged plastic pollution, with the company believing it has strong defenses
- No material adverse effects expected from the final outcomes of these legal proceedings
Management's Discussion and Analysis:
- Organic revenue growth and operating profit performance were impacted by factors such as effective net pricing, productivity savings, volume declines, operating cost increases, and foreign exchange
- Liquidity and capital resources remain strong, with the company generating positive cash flow from operations and maintaining access to credit facilities
- Continued focus on productivity initiatives, portfolio transformation, and investments in e-commerce and digital capabilities to drive growth
Earnings calls
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Earnings Report 2025Q1 (2025-04-24)
Key takeaways
- Frito-Lay North America is a key area of concern: Its underperformance is impacting the overall earnings outlook, and the effectiveness of the turnaround strategy is critical.
- International business is a strong growth driver: Its continued momentum is essential for maintaining the company's top-line guidance.
- Tariffs and macroeconomic uncertainty pose significant risks: These external factors are impacting the company's profitability and require active mitigation strategies.
- Portfolio transformation is crucial for adapting to changing consumer preferences: This includes offering healthier options, smaller portion sizes, and products that align with dietary trends like GLP-1.
- Operational excellence and cost management are essential for margin improvement: The company is focused on driving productivity gains and reducing costs across its value chain.
- North America integration presents opportunities for efficiency and growth: Combining the beverage and snack businesses can unlock synergies and improve competitiveness.
- Revenue management is becoming more complex: The company is using data and analytics to optimize pricing and promotions based on consumer behavior and channel dynamics.
Focus of management’s prepared remarks
- Frito-Lay North America Turnaround: Management is executing a three-pillar strategy: granular value investments, portfolio transformation towards more permissible and functional snacks, and operational excellence.
- International Business Growth: The international business is the largest growth engine for the company, with continued investments in capacity, talent, go-to-market strategies, and brands.
- North America Beverage Margin Improvement: Improving the margin of the North American beverage business is a key priority, driven by operational excellence across the value chain.
- Portfolio Transformation: PepsiCo is focused on offering consumers options that align with their dietary preferences, including sodium reduction, sugar reduction, and better fats.
- Operational Excellence: Improving operational excellence across all business segments is a key focus, including rightsizing costs, improving field rates, and enhancing execution in go-to-market strategies.
- Tariff Mitigation: The company is actively working on mitigation plans to offset the impact of tariffs, with some plans expected to be executed more quickly than others.
- Capital Allocation: Management is committed to protecting the long-term health of the franchise while providing value to the consumer, balancing investment with productivity improvements.
- North America Integration: The company is integrating its North America beverage and snack businesses to improve efficiency and drive growth through shared infrastructure and go-to-market models.
Focus of the analyst Q&A
- Frito-Lay North America Performance:
- Magnitude and durability of volume weakness.
- Need for more substantial reinvestment behind FL&A, including pricing, frontline spend, and marketing.
- Impact of price pack architecture and away-from-home opportunities.
- Drivers of volume declines in larger packs versus smaller packs.
- Full-Year Earnings Outlook Reduction:
- Decomposition of the drivers behind the reduced outlook, specifically tariffs, macro uncertainty, and Frito-Lay's performance.
- Pockets of tariff friction and long-term plans to offset them.
- International Business Expectations:
- Expectations for international business growth acceleration.
- Specific market performance, including China, Mexico, Europe, India, and Brazil.
- Impact of New Legislation:
- How the business can deal with new legislation around ingredients and colors.
- Sensitivity to and exposure to the business with regard to SNAP.
- PBNA Business:
- Rationale behind the acquisition of Poppi and plans for the brand.
- Drivers for PB&A margins and medium-term margin goals.
- Energy Drink Strategy:
- Update on energy drinks category and performance.
- Willingness to bring on Alani Nu through the Celsius partnership distribution network.
- Pepsi Brand Performance:
- Durability of Pepsi brand market share gains.
- Thoughts on North American beverage business capabilities.
- Organic Sales Growth Guidance:
- Confirmation of including high inflation economies in organic sales growth.
- Contribution from these high inflation economies for the rest of the year.
- GLP-1 Medications:
- Impact of GLP-1 medications on the portfolio.
Summary
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Financial Performance
PepsiCo's Q1 2025 organic revenue growth was 1%. Management noted that including the third month of their international quarter, organic growth would have been 2%. The company reduced its full-year earnings outlook, citing tariffs, heightened macro and consumer uncertainty, and subdued performance from Frito-Lay North America.
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Revenue Drivers
The international business continues to be a significant growth engine, with solid performance in Q1 and expectations for continued growth throughout the year. China and Mexico are experiencing some consumer slowdown. Frito-Lay North America's performance is a concern, with ongoing efforts to turn the business around. Pepsi is gaining market share in carbonated soft drinks, driven by a focus on zero sugar options. Gatorade is also regaining share in the sports drink category.
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Profit Margins and Cost Management
Management is focused on improving the margin of the North American beverage business through operational excellence and productivity improvements across the value chain. They are also actively managing costs, as evidenced by fixed cost deleverage in Q1.
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Guidance and Outlook
The company adjusted its full-year earnings guidance downward due to tariffs, macro-economic uncertainty, and Frito-Lay's performance. Top-line guidance remains unchanged, supported by international momentum. The outlook incorporates current tariff estimates and mitigation plans.
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Strategic Initiatives
PepsiCo is executing a playbook for Frito-Lay North America that includes granular value investments, portfolio transformation (offering more permissible and functional snacks), and operational excellence. The company is also focused on portfolio transformation to offer consumers options that align with their dietary preferences, including protein, fiber, and hydration. They are also integrating the North America beverage and snack businesses to improve efficiency and drive growth.
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Management Commentary
Management expressed confidence in the long-term growth potential of the international business and its accretive nature. They also believe the U.S. business can grow at a faster rate through better execution, portfolio evolution, and expansion into new channels. They emphasized the importance of intelligent reinvestment in value and participation in emerging market segments. Management is optimistic about the company's ability to navigate changing consumer preferences and market dynamics.
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Industry and Market Conditions
The company acknowledges heightened macro and consumer uncertainty, as reflected in the Consumer Confidence Index. They are monitoring the potential impact of new legislation around ingredients and colors and are working to transition the portfolio to natural colors. They are also assessing the potential impact of SNAP restrictions on their business. The company is also closely monitoring the GLP-1 medications and their impact on consumer dietary preferences, and are innovating to offer products that align with these trends.
Comparative analysis
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Benchmarks (as of 2025-05-13)
Consumer Staples Select Sector SPDR Fund (XLP)
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Performance Comparison:
- PepsiCo, Inc. (PEP) has generally underperformed the Consumer Staples Select Sector SPDR Fund (XLP) across all time periods analyzed. For instance, the year-to-date performance shows PEP at -12.48% compared to XLP at 2.54%, a difference of -15.02%. Similarly, over the past year, PEP's return was -25.14%, while XLP's was 6.17%, indicating a significant underperformance of -31.31%.
- The consistency of PEP's underperformance relative to XLP is evident across the 1-month, 3-month, 6-month, 2-year, and 3-year periods, suggesting a persistent trend.
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Risk and Return Analysis:
- The annualized returns further highlight PEP's underperformance. Over the past year, PEP's annualized return was -25.14%, compared to XLP's 6.17%. Over a 3-year period, PEP's annualized return was -6.73%, while XLP's was 3.87%. This indicates that PEP has provided lower returns compared to XLP.
- PEP's annualized volatility has generally been higher than XLP's, indicating that PEP's returns are more dispersed. For example, in Q2 2022, PEP's volatility ranged from 21.41% to 29.99%, while XLP's ranged from 18.03% to 27.62%.
- PEP experienced a maximum drawdown of -29.31% on 2025-05-13, while XLP's maximum drawdown was -16.3% on 2022-10-07. This suggests that PEP has a higher risk profile compared to XLP, as it has experienced more significant peak-to-trough declines.
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Risk-Adjusted Performance:
- The Sharpe ratios for PEP have generally been lower than those of XLP, indicating that XLP has offered better risk-adjusted returns. As of 2025-05-13, PEP's Sharpe ratio was -1.42, while XLP's Sharpe ratio was 0.5.
- The beta values for both PEP and XLP have generally been below 1, indicating that they are less volatile than the overall market. However, PEP's beta has decreased recently, suggesting a lower sensitivity to market movements. As of 2025-05-13, PEP's beta was 0.12, while XLP's beta was 0.25.
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Overall Assessment:
- Based on the analysis, PepsiCo, Inc. (PEP) has underperformed the Consumer Staples Select Sector SPDR Fund (XLP) across various performance metrics. PEP has shown lower returns, higher volatility, and larger drawdowns compared to XLP. The Sharpe ratios indicate that XLP has provided better risk-adjusted returns.
- A significant trend is PEP's consistent underperformance relative to XLP across different time periods. Additionally, PEP's higher volatility and larger drawdowns suggest a higher risk profile. These insights suggest that, based on the analyzed data, Consumer Staples Select Sector SPDR Fund (XLP) has been a comparatively better investment than PepsiCo, Inc. (PEP).
Peers Price History(as of 2025-05-13)
- Performance Comparison:
- PepsiCo, Inc. (PEP) has generally underperformed both Monster Beverage Corp. (MNST) and Coca-Cola Consolidated, Inc. (COKE) across various time periods, including Year-To-Date (YTD), 1 Week, 1 Month, 3 Months, 6 Months, 1 Year, 2 Years, and 3 Years. For example, the 3-year annualized return for PEP is -6.73%, while MNST's is 10.57% and COKE's is 31.11%. This indicates that PEP has not generated as much return as its peers over these periods.
- Risk and Return Analysis:
- The annualized returns for PEP are consistently lower than those of MNST and COKE. For instance, the 1-year annualized return for PEP is -25.14%, compared to 10.55% for MNST and 21.48% for COKE.
- PEP generally exhibits lower annualized volatility compared to MNST and COKE. For example, in Q2 2022, PEP's volatility ranged from 21.41% to 29.99%, while COKE's ranged from 46.52% to 63.46%. This suggests that PEP's stock price is more stable than its peers.
- PEP experienced a maximum drawdown of -29.31% on 2025-05-13, which is greater than Monster Beverage Corp. (MNST) at -26.04% on 2024-08-08, but less than Coca-Cola Consolidated, Inc. (COKE) at -35.52% on 2022-09-27.
- Risk-Adjusted Performance:
- Coca-Cola Consolidated, Inc. (COKE) generally exhibits higher Sharpe Ratios compared to PepsiCo, Inc. (PEP) and Monster Beverage Corp. (MNST), indicating better risk-adjusted returns over the period. PEP often has the lowest Sharpe Ratio among the three.
- The beta values for PEP are consistently lower than those of MNST and COKE, indicating that PEP is less sensitive to market movements.
- Overall Assessment:
- Based on the analysis, PepsiCo, Inc. (PEP) has underperformed its peer companies, Monster Beverage Corp. (MNST) and Coca-Cola Consolidated, Inc. (COKE), in terms of historical performance and annualized returns. While PEP exhibits lower volatility and beta values, its risk-adjusted returns, as indicated by the Sharpe Ratio, are generally lower than its peers. This suggests that PEP may be a more stable but less rewarding investment compared to MNST and COKE.
Peers Fundamentals(as of 2025-03-31)
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Market Position and Size:
- PepsiCo (PEP) is the dominant player in its peer group, boasting a market capitalization of $180,201.04 million, significantly larger than Monster Beverage Corp. (MNST) at $58,649.31 million and Coca-Cola Consolidated, Inc. (COKE) at $10,337.90 million.
- This substantial market cap is supported by PEP's higher revenue ($91,522 million) and gross income ($50,307 million) compared to its peers.
- PEP's size and revenue generation capabilities solidify its leading market position within the "Consumer Non-Durables" sector and "Food: Specialty/Candy" industry.
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Profitability and Efficiency:
- PEP demonstrates strong profitability, with a Gross Profit Margin of 54.97%, exceeding COKE's 39.36% and the industry average of 26.15%.
- Its EBITDA Margin of 19.68% is also greater than COKE's 15.91% and the industry average of 6.93%.
- While PEP's Net Profit Margin of 10.24% is less than MNST's 20.27%, it still surpasses COKE's 8.29% and the industry average of -2.32%.
- PEP showcases efficient equity utilization, generating a Return on Average Total Equity of 50.06%, significantly higher than its peers and the industry average.
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Financial Health and Stability:
- PEP's liquidity position is a concern, with a Current Ratio of 0.83, falling short of MNST's 3.37, COKE's 2.03, and the industry average of 1.96.
- Its Quick Ratio of 0.65 further suggests liquidity challenges compared to its peers and the industry average.
- PEP's Total Debt to Total Equity Ratio of 263.84 indicates high leverage, significantly exceeding its peers and the industry average.
- However, its Debt / EBITDA of 2.69 is less than the industry average of 4.6.
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Valuation and Market Perception:
- PEP's Enterprise Value To Sales of 2.62 is greater than COKE's 1.94 and the industry average of 2.13.
- Its Enterprise Value To EBITDA of 13.34 is greater than COKE's 12.09 but less than the industry average of 22.81.
- PEP's Price To Earnings of 19.33 is less than MNST's 39.74 and the industry average of 48.1.
- These valuation metrics suggest that PEP is reasonably valued compared to its peers and industry standards.
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Cash Flow and Capital Management:
- PEP generates substantial cash flow, with a Net Operating Cash Flow of $12,575 million, significantly greater than COKE's $885.67 million.
- Its Total Capital Expenditure of $5,307 million is also significantly greater than COKE's $391.84 million.
- PEP's Free Cash Flow of $7,268 million is significantly greater than COKE's $493.83 million.
- However, PEP's Cash Conversion Ratio is -1.88, which is less than COKE's 0.52 and the industry average of 0.9.
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Growth and Future Prospect:
- PEP's revenue growth has been inconsistent, with a recent year-over-year decrease of -0.38%, underperforming the peer average of 8.34%.
- Its EBITDA growth has also been inconsistent, with a recent year-over-year decrease of -0.84%, underperforming the peer average of 13.52%.
- PEP's net income growth has been highly variable, with a recent year-over-year increase of 2.03%, significantly underperforming the peer average of 50.51%.
- PEP's 3-year and 5-year CAGR figures are generally lower than its peers, suggesting a weaker long-term growth trend.
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Potential for Investment:
- PEP presents a mixed investment profile. Its strong profitability, efficient equity utilization, and substantial market capitalization make it an attractive investment option.
- However, its weaker liquidity position, high leverage, and recent revenue growth challenges raise concerns about financial risk and future growth potential.
- Investors should carefully weigh these factors before making an investment decision.
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Key Risks and Considerations:
- PEP's high leverage and weaker liquidity position pose financial risks.
- Its recent revenue growth challenges and lower long-term growth trends compared to peers raise concerns about its future prospects.
- Changes in consumer preferences, competition, and regulatory factors could impact PEP's performance.
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Overall Assessment:
- PepsiCo (PEP) is a dominant player in its industry with strong profitability and efficient equity utilization.
- However, its high leverage, weaker liquidity, and recent revenue growth challenges warrant caution.
- Investors should carefully consider these factors when evaluating PEP's overall financial position, performance, and outlook.
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