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Tuesday, July 23, 2024

PepsiCo Reports Solid Q2 2024 Results

PepsiCo Technical Analysis

PepsiCo Is currently in a significant range, using the 157.5 level as a key support. It is also in a strong support zone with a low chance of it breaking as evidenced by the price bouncing off it on previous pullbacks. If the fundamentals allow it, we could see Pepsico nearing a potential price target of ~180 before stagnating around that area.

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Pepsico Q2 2024 Results

PepsiCo (NASDAQ: PEP) reported its second quarter 2024 financial results on July 11, delivering revenue growth and strong earnings despite facing some challenges.

Key highlights:

  • Net revenue grew 0.8% to $22.5 billion
  • Organic revenue increased 1.9%
  • Earnings per share rose 13% to $2.23
  • Core EPS grew 9% to $2.28
Pepsico Q2 2024. Source: https://investors.pepsico.com/docs/default-source/investors/q2-2024/q2-2024-earnings-release_dr90yw4b12khgowp.pdf

The company saw organic revenue growth across most divisions, with a particularly strong performance in international markets. Europe’s organic revenue grew 7%, while Africa, the Middle East, and South Asia saw 12% organic growth.

However, PepsiCo faced challenges in North America. Frito-Lay North America revenue declined 0.5% as volume fell 4%. Quaker Foods North America’s revenue dropped 18% due to impacts from a product recall.

Pepsico Q2 2024 Revenue Growth. Source: https://investors.pepsico.com/docs/default-source/investors/q2-2024/q2-2024-earnings-release_dr90yw4b12khgowp.pdf

“During the second quarter, our business delivered net revenue growth, strong gross and operating margin expansion and double-digit EPS growth, remaining agile despite facing difficult net revenue growth comparisons versus the prior year, subdued category performance within North America convenient foods and the impacts associated with certain product recalls at Quaker Foods North America,” said Chairman and CEO Ramon Laguarta.

For the full year 2024, PepsiCo now expects:

  • Approximately 4% organic revenue growth (down from previous guidance of at least 4%)
  • At least 8% core constant currency EPS growth
  • Core EPS of at least $8.15

The company plans to focus on productivity initiatives and targeted investments to stimulate growth in the second half of the year, particularly in North America.

“We will further elevate and accelerate our productivity initiatives and make disciplined commercial investments in the marketplace to stimulate growth,” Laguarta said. “These investments will focus on surgically providing optimal value propositions within certain portions of our North America convenient foods portfolio, amplifying our advertising and marketing initiatives and leveraging our go-to-market distribution capabilities to enable more precise marketplace execution.”

Analyst Price Recommendations

Over the past two months, several financial institutions have revised their price targets for PepsiCo (PEP).

Wells Fargo & Company recently lowered its target price for PepsiCo from $175.00 to $170.00 on July 10, 2024, while maintaining an “Equal Weight” rating. This adjustment follows a trend of target reductions from other major analysts.

Jefferies Financial Group and Bank of America both reduced their price targets on July 9 and July 8, respectively. Jefferies lowered its target from $210.00 to $200.00, while Bank of America made a more significant cut from $210.00 to $190.00. Both firms maintained their “Buy” ratings on the stock.

TD Cowen also joined the trend, reducing its target from $200.00 to $190.00 on July 3, 2024, while keeping a “Buy” rating.

However, not all adjustments were downward. JPMorgan Chase & Co. bucked the trend on June 26, 2024, by raising its target slightly from $181.00 to $184.00, maintaining a “Neutral” stance.

In late June, BNP Paribas initiated coverage of PepsiCo with a “Neutral” rating and a price target of $174.00.

Earlier in the period, on June 12, 2024, Barclays lowered its target from $185.00 to $180.00 while maintaining an “Overweight” rating.

These adjustments show a cautious outlook among analysts, with most lowering their expectations slightly. However, the majority still maintain positive or neutral ratings on PepsiCo stock.

The Bottom Line

PepsiCo’s focus on productivity initiatives and targeted investments in the second half of the year shows a proactive approach to addressing areas of weakness and stimulating growth.

However, the revised full-year guidance, with organic revenue growth now expected to be around 4% instead of at least 4%, suggests some caution about the near-term outlook. This aligns with the generally cautious stance taken by analysts, as reflected in the recent price target adjustments.

From a technical analysis perspective, the stock appears to have strong support around the $157.5 level, which could provide a foundation for potential upside if fundamentals improve. The potential price target of ~$180 aligns with some of the more optimistic analyst price targets.

Lazarus Lucas is the Publisher, editor, and creator of LJLNews. Stock Market enthusiast, with an interest for politics. Independent trader, analyst, and asset manager. Lazarus publishes articles on LJLNews with technical analysis on various markets, such as currencies, stocks, and commodities. Contact: Lazaruslucas@ljlnews.com

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