Shares of beverage giant PepsiCo (PEP) are rising in pre-market trading after the company beat both sales and earnings expectations. The company also announced that Steve Schmitt will assume the role of CFO, effective November 10, as current CFO Jamie Caulfield plans to retire next year. Schmitt joins PepsiCo from retailer Walmart (WMT), where he currently serves as Executive Vice President and CFO for Walmart U.S.
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PepsiCo reported adjusted earnings of $2.29 per share, exceeding the consensus of $2.26 per share but slightly below the prior year period’s earnings of $2.31 per share. At the same time, revenue rose 2.6% year-over-year to $23.94 billion, beating the analysts’ consensus of $23.85 billion. The company reiterated its full year Fiscal 2026 guidance and projected a total shareholder return of about $8.6 billion in 2025.
Highlights from PepsiCo’s Q3 Results
Although PepsiCo exceeded Wall Street’s expectations in Q3, its sales continue to face challenges, particularly in the domestic market. PepsiCo’s global food and beverage volume declined by 1% during the quarter. Meanwhile, PepsiCo Foods North America (PFNA), which includes brands such as Doritos and Quaker Oats, reported a 4% decline in volume during Q3. Additionally, PepsiCo’s North American beverage unit experienced a 3% drop in volume.
Organic sales growth was driven by a 5.5% increase in the Europe, Middle East, and Africa (EMEA) segment, whereas the PFNA segment saw a 3% decline.
Pepsi Reiterates Fiscal 2025 Outlook
PepsiCo reiterated its full-year sales guidance, expecting growth in the low-single-digit percentage range. Meanwhile, full-year earnings are projected to be in line with the prior year’s earnings of $8.16 per share.
Regarding shareholder returns, PepsiCo aims to return $7.6 billion through cash dividends and $1 billion via share repurchases. PEP stock currently carries a dividend yield of 3.95%, with quarterly dividends of $1.423 per share.
Pepsi Faces Activist Pressure
While Pepsi is undergoing a turnaround to boost sales, activist investor Elliott Management recently took a $4 billion stake in the company and continues to pressure the snacks maker. Elliott is urging Pepsi to streamline operations by outsourcing its low-margin, asset-heavy bottling activities and divesting underperforming categories such as pasta, cereals, and syrups.
The activist investor argues that such moves would allow Pepsi to concentrate on higher-value core brands like Pepsi, Mountain Dew, and Gatorade. In response, Pepsi stated that it maintains “an active and productive dialogue” with shareholders and will evaluate Elliott’s recommendations.
Is PEP Stock a Buy, Hold, or Sell?
On TipRanks, PEP stock has a Moderate Buy consensus rating based on five Buys and nine Hold ratings. The average Pepsi price target of $155.93 implies 12.3% upside potential from current levels. Year-to-date, PEP stock has lost nearly 6%.
Please note that these ratings were issued before the Q3 print and are subject to change once analysts update their views.
