PepsiCo (PEP) maintains its "Buy" rating from BofA Global Research, with a price objective of $185, reflecting a P/E multiple of 21x on the CY26 EPS estimate. The report highlights PepsiCo's strategic shift for FY25, moving away from heavy promotions to a more diversified approach, including new pack sizes and brand relaunches. This change is in response to a stronger USD and slower category growth rates, which are now around 2% y/y, below historical averages.
Frito-Lay North America (FLNA) is identified as a critical driver for earnings and share price direction over the next year. The segment faces challenges from high prices, wellness trends, and a slump in convenience stores. PepsiCo plans to address these issues with value-focused initiatives, such as relaunching the "Simply" brand with "clean" ingredients. International markets are expected to outperform North America in 2025, with a new segmentation strategy set to launch in Q1.
BofA's model adjustments for 1Q25 include a slight reduction in EPS to $1.53, down 5% y/y, and a minor tweak in organic growth to +2% y/y for FY25. The report states, "Remedial actions to address volume weakness are underway; the stock should behave well if market share follows suit."
PepsiCo's current stock price is $143.27, down 0.15% from the previous close.