Stock movement in 2019
As of February 11, PepsiCo (PEP) stock has risen 2.3% since the start of 2019. In comparison, stocks of nonalcoholic beverage peers Coca-Cola (KO), Keurig Dr Pepper (KDP), and Monster Beverage (MNST) have performed better than PepsiCo with gains of 4.8%, 9.9%, and 17.8%, respectively, on a YTD basis. The S&P 500 has risen 8.1% so far this year.
PepsiCo stock fell 7.9% in 2018, lagging Coca-Cola stock, which rose 3.2% and also performed worse than the S&P 500, which fell 6.2%. PepsiCo will announce its 2018 fourth-quarter results on February 15. We discussed analysts’ fourth-quarter revenue and earnings expectations for PepsiCo in the previous parts of this series.
Recent analyst activity
On December 13, UBS commenced coverage of PepsiCo with a “neutral” recommendation and a price target of $123. On January 9, Goldman Sachs lowered its price target for PepsiCo stock to $107 from $109. On January 29, J.P. Morgan lowered its price target to $123 from $124.
As of February 11, the 12-month price target for PepsiCo stock was $115.05. This average price estimate implies an upside potential of about 2.0% compared to the closing stock price of $112.97 on February 11. As of February 11, PepsiCo stock was rated a “hold” by 61%, or 14 out of 23 analysts. The stock is rated a “buy” by eight analysts, while one analyst believes that PepsiCo stock is a “sell.”
PepsiCo’s strengths include its strong brand value, an extensive snack food and beverage portfolio, a significant geographic presence in over 200 countries, and a vast distribution network. The company is investing significantly in the innovation of better food and beverage products with lower levels of salt, added sugar, and saturated fat. In December 2018, PepsiCo completed the acquisition of at-home sparkling water maker SodaStream for $3.2 billion. This acquisition is expected to help PepsiCo leverage Sodastream’s at-home presence to boost its sparkling water as well as other beverage sales.
We’ll discuss PepsiCo’s valuation in the next part of this series.