PepsiCo’s Valuation after Its Fiscal 3Q17 Results
12-month forward PE
As of October 5, 2017, PepsiCo (PEP) was trading at a 12-month forward PE (price-to-earnings) ratio of 20.3x. On October 4, 2017, its valuation multiple fell 2.4% after the announcement of its fiscal 3Q17 results.
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Comparison with peers
PepsiCo is trading at a higher valuation multiple than Dr Pepper Snapple (DPS) but lower than Coca-Cola (KO) and Monster Beverage (MNST). As of October 5, 2017, Coca-Cola, Dr Pepper Snapple, and Monster Beverage were trading at 12-month forward PE ratios of 23.9x, 18.8x, and 35.1x, respectively. The 12-month forward PE differs among companies based on several factors, including growth prospects, business model, and risk-return profiles.
As of October 5, 2017, the S&P 500 Index was trading at a 12-month forward PE of 18.3x. The S&P 500 Consumer Staples Index was trading at a 12-month forward PE of 20.5x.
Following PepsiCo’s fiscal 3Q17 results, analysts expect the company’s revenue to rise 1.2% to $63.6 billion in fiscal 2017. The company’s adjusted EPS (earnings per share) is forecast to rise 7.2% to $5.20 in fiscal 2017.
Softness in soda volumes, macroeconomic challenges in certain key markets such as Latin America, and raw material inflation are likely to put pressure on PepsiCo’s performance. Natural disasters such as earthquakes in Mexico and hurricanes in the Caribbean and Puerto Rico are expected to have a negative impact on the company’s performance in fiscal 4Q17 and fiscal 2017.
Let’s look at the impact of PepsiCo’s fiscal 3Q17 results on analysts’ price targets in the next part of this series.