RBC Capital Markets analyst Nik Modi reiterates a Sector Perform rating on PepsiCo, Inc. PEP, with a price target of $178.
PepsiCo will issue its second quarter 2023 (ending June 17) financial results and other related information on July 13, 2023.
The analyst expects a strong second quarter from PEP driven by Frito Lay momentum, solid results in PBNA, and international led by Latin America and emerging markets.
Frito Lay momentum has continued with tracked channel sales of +13.6% in the quarter, with volumes roughly in line with last quarter.
By segment, Pepsi Beverages North America (PBNA), Frito-Lay North America (FLNA), and Quaker Foods North America (QFNA) remained resilient and were up +6.2%, +13.6%, and +4.5% Y/Y, respectively, in tracked channels.
Modi also sees an upside to PEP’s guidance for the year given the higher margin Frito driving momentum but also expects PEP to continue reinvesting to drive the topline/volume recovery.
For the rest of the year, Modi expects PEP to be able to raise organic and EPS guidance on the strength in the quarter, though the flow-through will be modest, reflecting the uncertainties of the environment and PEP’s typical prudence.
Given the above, the analyst raised 2Q revenue estimates to $21.518 billion from $21.488 billion. 2Q EPS is expected to be $1.95.
Price Action: PEP shares are trading lower by 0.56% to $183.27 on the last check Tuesday.
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