Goldman Sachs Upgrades PepsiCo Stock after Strong Q1 Results

Goldman Sachs upgrades rating

On April 18, Goldman Sachs upgraded its rating for PepsiCo (PEP) stock after the company released impressive first-quarter results. PepsiCo reported its first-quarter results on April 17. The company’s revenue grew 2.6% to $12.88 billion and came in ahead of analysts’ forecast of $12.70 billion. Despite the impact of currency fluctuations and structural changes, PepsiCo delivered strong organic revenue growth of 5.2%. PepsiCo’s adjusted EPS of $0.97 also beat expectations by five cents.

Goldman Sachs’s meeting with PepsiCo CEO Ramon Laguarta and CFO Hugh Johnston gave it confidence about the continued momentum in the company’s snack food business and 2019 earnings potential. Goldman Sachs also increased its price target for PepsiCo stock to $132 from $111.

Goldman Sachs Upgrades PepsiCo Stock after Strong Q1 Results

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Analysts reacted positively

Several analysts raised their price target following PepsiCo’s strong first-quarter results.

  • Credit Suisse: $106 from $100
  • Wells Fargo: $120 from $115
  • Morgan Stanley: $137 from $130
  • Guggenheim: $124 from $113
  • BMO: $120 from $115
  • Suntrust Robinson: $120 from $110
  • Macquarie: $138 from $126
  • UBS: $130 from $120

As of April 18, PepsiCo stock was up 15.0% on a YTD basis. Peers Coca-Cola (KO), Keurig Dr Pepper (KDP), and Monster Beverage (MNST) lagged PepsiCo with rises of 0.3%, 3.8%, and 12.1% on a YTD basis.

As of April 18, the 12-month price target for PepsiCo stock was $127.47, which reflects only a 0.3% upside potential when compared to the closing stock price of $127.09 on April 18. PepsiCo stock was rated a “buy” by eight analysts, a “hold” by 14 analysts, and a “sell” by one analyst as of April 18.

PepsiCo doesn’t expect the strong organic performance in the first quarter, especially that of the Frito-Lay North America division, to continue in the remainder of 2019.