New York-based PepsiCo, Inc. (PEP) is a global food and beverage company that offers snacks, cereals, beverages, and dairy products under popular brands such as Lay's, Doritos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, and Aquafina, among others. With a market cap of $238.5 billion, it also sells ready-to-drink tea and coffee products along with brands like Crush and Dr Pepper. The company’s diverse earnings from the food sector sets it apart from competitors like The Coca-Cola Company (KO).
Companies worth $200 billion or more are generally described as “mega-cap stocks,” and PepsiCo fits right into that category. Its market cap exceeds this threshold, reflecting its substantial size, stability, and influence in the consumer defensive sector. The food and beverage giant enjoys a loyal customer base and aims to lead sustainability in the industry.
PepsiCo shares are trading 9.8% below its 52-week high of $192.38, achieved on July 26, 2023. However, shares of PEP are up 6.4% over the past three months, outshining the Vanguard Mega Cap ETF’s (MGC) 5.5% returns over the same time frame.
But it's not all sunshine and rainbows. In the longer term, PEP stock is up 2.2% on a YTD basis, and over the past 52 weeks, the stock has tumbled by 4.5%. By contrast, the MGC is up 13.7% in 2024 and 27.2% over the past 52 weeks.
Although the stock has underperformed the broader market over the past year, it has been on an uptrend recently, trading above its 100-day and 200-day moving averages since late April.
The company's underperformance relative to the broader market over the past year can be linked to its sluggish growth in recent quarters, which was due to high inflation and macroeconomic headwinds. However, PepsiCo's earnings are well-diversified, with over half coming from its food division, which includes popular snack and breakfast brands like Doritos and Quaker Oats. The company has also been actively expanding its portfolio in both developed and emerging markets to stimulate demand.
Additionally, the company reported its Q1 earnings results on April 23, surpassing Wall Street's top and bottom-line projections, as international demand for its sodas and snacks, including Cheetos and Doritos, fueled growth. However, the Q1 beat was overshadowed by a Quaker Foods business recall and a drop in U.S. sales, causing PEP stock to decline 3% on April 23.
To emphasize the stock’s underperformance, it is worth noting that PepsiCo’s top rival, Coca-Cola, continues to outshine PEP. KO stock has surged 6.6% over the past 52 weeks and 9.1% on a YTD basis, dwarfing PEP’s returns over the same time frames.
Despite PepsiCo’s underperformance, analysts are cautiously optimistic about its future. The stock has a consensus rating of “Moderate Buy” from the 18 analysts covering it, and the mean price target of $191.56 reflects a premium of 10.4% to current levels.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
