Beverage King PepsiCo (NASDAQ:PEP) is slated to release its second quarter Fiscal 2023 financial results before the bell on Thursday, July 13. Wall Street expects Pepsi to post adjusted earnings of $1.96 per share, up 5.4% compared to the Fiscal Q2-2022 figure. Similarly, quarterly sales are expected to reach $21.73 billion, growing 7.4% compared to the same period last year.
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The Frito-Lay maker has consistently exceeded analysts’ estimates in all eight past quarters, giving hope that it will surpass expectations this time as well. Based on the resilient demand for its products, PepsiCo raised its Fiscal 2023 revenue guidance to 8% organic revenue growth (previously 6%) and 9% core constant currency EPS growth (previously 8%). PepsiCo also rewards its shareholders with a quarterly dividend of $1.26 per share, reflecting a current yield of 2.56%.
The company is expected to continue benefiting from pricing power, as seen in the prior quarter. Meanwhile, volumes may continue to remain compressed as consumers are still wary of inflationary pressures.
What Wall Street Expects from PEP’s Results
Ahead of the Q2 print, Barclays analyst Lauren Lieberman slashed the price target on PEP to $198 (7.6% upside potential) from $206 but maintained a Buy rating. Lieberman is optimistic about PepsiCo’s second-quarter results, thanks to its strong organic sales and operating margin performance. However, looking at the second half of the year, the analyst has modest growth expectations for PepsiCo stock.
On the other hand, Goldman Sachs analyst Bonnie Herzog reiterated a price target of $208 (13.1% upside potential) and her Buy rating on PEP stock. Herzog expects Pepsi to beat both the top and bottom lines in Q2. The analyst believes PepsiCo will benefit from consumer resilience despite the tough macro backdrop and considers PEP as one of the best global food and beverage companies.
Additionally, Herzog expects PepsiCo to further update its Fiscal 2023 outlook in the second quarter earnings call. As per her estimates, the company could increase full-year revenue guidance to 9% (up from 8%) and its organic growth and earnings outlook to 10% (up from 9%).
Herzog reiterated, “PEP remains very well positioned given its strong brand portfolio (esp. Frito Lay) and long-term growth opportunities in Beverages, particularly given its impressive revenue growth management capabilities, its owned distribution network and superior supply chain which ensures the right (& affordable) products available when & where needed.”
Is PEP a Buy or Sell, According to Analysts?
Analysts remain cautiously optimistic about PepsiCo stock’s trajectory. On TipRanks, PEP has a Moderate Buy consensus rating based on six Buys versus five Hold ratings. The average PepsiCo price forecast of $196.27 implies 6.7% upside potential from current levels. Year-to-date, PEP stock is up 4%.
Ending Thoughts
PepsiCo has managed to command pricing power for its offerings despite the inflationary environment. Even so, the company needs to regain its volume growth in the coming days to improve its financial performance. At the same time, analysts remain modestly optimistic about PepsiCo’s stronghold in the food and beverage industry and its future pathway.
