Citi Presents Concerns About Upcoming PepsiCo Earnings Report
Analysts Caution on PepsiCo's Upcoming Earnings Performance
Citi analysts are expressing mounting concerns about PepsiCo (NASDAQ: PEP) as the company approaches the release of its third-quarter earnings report. The report is anticipated to highlight some troubling trends in organic sales growth, leading to worries about stock performance in the near future.
Weak Sales Growth Predictions
According to market insights from Citi, its analysts forecast modest organic sales growth of approximately 1.5%, significantly trailing the broader market consensus which stands at around 3.5%. Market trends suggest a slump in sales within North America, particularly impacting beverages and snack categories.
While North America appears to be facing challenges, the international markets are expected to perform notably better, with projected growth hovering around the mid-single digits, providing a sliver of optimism for the overall numbers.
Revised Guidance and Earnings Expectations
Looking forward, Citi has raised concerns regarding PepsiCo's guidance for organic sales growth in 2024, suggesting a cut from an initial projection of 4% down to about 3%. Analysts predict that the upcoming guidance may reflect a more conservative outlook, hinting at potential adjustments.
In terms of earnings per share (EPS), Citi expects PepsiCo to uphold its previous guidance of at least $8.15. However, there is speculation about a risk of a downward adjustment, particularly in a worst-case situation, which could equate to a decrease of around 100 basis points.
EPS Forecast and Stock Valuation
Despite the anticipated challenges, Citi maintains a cautious optimism. The firm is forecasting an EPS of $2.28, slightly below the consensus of $2.30. Yet, even amidst the hurdles expected in Q3, they have retained a Buy rating on PepsiCo for the next year.
According to Citi analysts, a pivotal topic regarding PepsiCo is whether the company may need to consider lowering snack prices to stimulate demand. This pricing strategy could, in turn, expose the company to further risks for the upcoming year's earnings outlook.
Future Outlook Amidst Current Challenges
PepsiCo's stock is currently trading at approximately 20 times Citi’s below-consensus EPS estimate of $8.50 for 2025. Analysts believe that a portion of the expected risks associated with the company's upcoming earnings has already been factored into the current stock valuation. Therefore, even with the short-term uncertainties, Citi continues to back PepsiCo's long-term potential by maintaining a Buy rating.
Frequently Asked Questions
What are Citi analysts predicting for PepsiCo's earnings?
Citi forecasts a potential miss on organic sales growth, with estimates at 1.5%, below the consensus of 3.5%.
How is PepsiCo's North American market performing?
North American sales are showing weakness, particularly in beverages and snacks, impacting overall growth expectations.
What is the current stock valuation of PepsiCo?
The stock is trading at about 20 times Citi's below-consensus earnings estimate for 2025.
Has Citi maintained its rating on PepsiCo?
Yes, despite the challenges, Citi retains a Buy rating on PepsiCo for a 12-month outlook.
What could affect PepsiCo's earnings guidance for 2024?
There are concerns that PepsiCo may need to lower snack pricing to enhance demand, which could impact future earnings guidance.
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