Impact of 4Q17 results
PepsiCo (PEP) announced its fiscal 4Q17 and fiscal 2017 results on February 13, 2018. Following those results, PEP stock was downgraded to “in line” from “outperform” by Evercore on February 14. As of February 15, 13 of the 25 analysts (or 52%) covering PEP stock are recommending a “buy,” and 48% are recommending a “hold” for the stock. There are currently no “sell” recommendations.
Several analysts also revised their price targets after PepsiCo’s 4Q17 results.
Revision to price target
On February 14, 2018, SunTrust Robinson Humphrey lowered its price target for PepsiCo stock to $115 from $125. Deutsche Bank lowered its price target to $129 from $133. However, Jefferies raised its price target to $116 from $113, and Credit Suisse raised its price target to $127 from $124.
As of February 15, the average 12-month price target for PEP stock was $124.76. That reflects an upside potential of 12.4%.
The road ahead
PepsiCo’s North America Beverages segment, which is its largest segment based on revenue, is struggling to perform well. The company is finding it difficult to improve its volumes amid changing consumer tastes. Its soda volumes have been persistently weak, reflecting consumers’ growing aversion to carbonated sugary drinks. PepsiCo is trying to improve the performance of its beverage business by offering customers low or no-calorie versions and by growing its noncarbonated drinks portfolio.
The company is also trying to improve its snack food business by offering healthier choices with low salt and fat levels. It’s also focusing on its e-commerce business, which currently contributes $1 billion in annualized retail sales.
PepsiCo’s strong geographic presence in more than 200 countries, its focus on innovation, and a strong brand portfolio are expected to help the company in tough market conditions.