Key Takeaways
- JPMorgan lowered PepsiCo’s rating to Neutral from Overweight, slashing its price target by 19% to $138.
- Earlier this week, Deutsche Bank cut PepsiCo to Hold from Buy, marking the second downgrade in recent days.
- Shares of PEP dipped approximately 1% during premarket hours after JPMorgan’s announcement.
- Wall Street analysts express concern that PepsiCo’s domestic turnaround has lost momentum amid escalating operational expenses.
- The company is scheduled to release its third quarter financial results on October 8 before markets open.
Shares of PepsiCo (PEP) declined roughly 1% in premarket trading following a rating cut from JPMorgan on Monday. The stock was trading around $128.50.
JPMorgan’s analyst Andrea Teixeira downgraded PepsiCo from Overweight to Neutral. Simultaneously, she reduced her price target significantly—by 19%—from $170 down to $138.
This marks the second time in days that a major financial institution has lowered its outlook on PepsiCo. Deutsche Bank initiated its own downgrade to Hold from Buy on Monday, adjusting its price objective to $138 from $155.
According to Teixeira, the company’s efforts to revitalize its North American business have hit a wall, even as operational expenses continue their upward trajectory. She highlighted disappointing performance across both the snack foods and broader food product categories.
Domestic Market Challenges Persist
The Frito-Lay North America division has implemented multiple strategic initiatives throughout the year. These measures encompass recipe adjustments, refreshed packaging designs, increased advertising investments, and competitive pricing strategies.
Yet revenue expansion remains sluggish. Teixeira observed that the turnaround “appears to have stalled” since the opening quarter of 2026.
The PepsiCo Foods North America segment has demonstrated modest gains. However, Teixeira suggested these improvements appear more connected to macroeconomic tailwinds than to company-specific initiatives.
Overseas operations have delivered stronger results this year. Positive weather patterns and the FIFA World Cup tournament provided temporary sales momentum.
Teixeira cautioned that such benefits are not sustainable. When accounting for these temporary factors, she noted that North American performance continues to underperform relative to management projections.
Profit Forecasts Revised Downward
JPMorgan reduced its 2027 earnings per share projection to $8.86, down from $9.05. The firm also adjusted its 2028 forecast lower to $9.33 from $9.57.
These revised numbers fall beneath the Street consensus of $8.95 and $9.47, respectively. Teixeira indicated that PepsiCo will probably depend more heavily on manufacturing efficiencies and expense management to achieve the lower threshold of its 5% to 7% earnings growth target range.
Additional transportation-related expenses are creating headwinds as the fourth quarter approaches. Teixeira also adjusted her third quarter organic revenue growth projection downward to 2.8% from 3.2%.
Her Q3 earnings per share estimate now stands at $2.29, revised from $2.31. She attributed the change to softer consumer demand in North America and disappointing retail channel performance data.
Teixeira noted that PepsiCo’s current valuation—trading at approximately 15 times earnings—aligns with industry comparables. She suggested a potential valuation uplift could occur if leadership demonstrates consistent volume expansion within the Frito-Lay North America business.
Deutsche Bank’s Steve Powers shared comparable concerns on Monday. He expressed reduced confidence in PepsiCo’s North American strategic path, noting that recent restructuring initiatives have delivered inconsistent or fleeting outcomes.
PepsiCo will announce its third quarter financial performance on October 8 prior to the opening bell.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
