How PepsiCo stock has fared this year
PepsiCo (PEP) stock has risen 21.4% YTD (year-to-date) as of June 20. The snack and beverage giant is ahead of its rival the Coca-Cola Company (KO) and the S&P 500 Index, which have risen 9.1% and 17.8%, respectively, since the start of this year.
PepsiCo stock has risen 9.6% since the company announced impressive first-quarter results in April. PepsiCo exceeded analysts’ revenue and earnings expectations and generated impressive organic revenue growth of 5.2% in the quarter.
Many investors look for defensive stocks such as PepsiCo in an uncertain macro environment. PepsiCo is a dividend aristocrat—a term used for companies that have raised their dividends for more than 25 consecutive years. This year, PepsiCo increased its annual dividend by 3.0% to $3.82 per share, marking the 47th consecutive year of a dividend hike. As of June 20, PepsiCo’s dividend yield was 2.8% compared to Coca-Cola’s 3.1%.
Following PepsiCo’s impressive performance, Goldman Sachs raised its rating for the company to a “neutral” from a “sell” on April 18. Goldman also raised its price target for PepsiCo stock to $132 from $111. The bank’s meeting with PepsiCo’s management gave it confidence in the company’s earnings potential and the momentum in its snack food business. On May 14, Wells Fargo raised its price target on PepsiCo stock to $127 from $120.
On June 20, 14 out of 23 analysts (or 61%) rated PepsiCo stock as a “hold.” PepsiCo was rated as a “buy” by eight analysts and a “sell” by one. The 12-month average price target of $127.84 for PepsiCo stock reflects a potential downside of ~5% compared to the stock’s closing price on June 20.
PepsiCo’s extensive food and beverage portfolio (including 22 brands generating over $1 billion in annual retail sales), geographic presence in over 200 countries, and strong brand name are some of its key strengths. The company’s Frito-Lay North America segment is consistently driving its growth. However, weak soda volumes in the beverage business have become a matter of concern. PepsiCo is now focusing on enhancing its portfolio of better food and beverage choices.