PepsiCo Stock Faces Potential Downside Risk Ahead of Q3 Earnings - Citi Analysts Forecast Miss on Organic Sales Growth
As the world's best investment manager and financial market's journalist, I bring you the latest insights on PepsiCo's stock ahead of its third-quarter earnings report on October 8. Citi analysts have identified potential downside risk for PepsiCo, forecasting a miss on organic sales growth (OSG).
The bank has opened up a negative 30-day catalyst watch on the stock, with estimates predicting a +1.5% OSG, well below the consensus expectation of +3.5%. Weak performance in North America, particularly in beverages and snacks, is cited as a key factor.
Despite this, international growth is expected to come in at mid-single digits, providing some balance to the overall picture. However, Citi warns of potential risks to PepsiCo's 2024 OSG guidance and anticipates a cut to around 3%.
On the earnings per share (EPS) front, Citi expects PepsiCo to maintain its guidance of "at least $8.15", but acknowledges a slight risk of a cut in a worst-case scenario. The firm remains cautious on PepsiCo's Q3 performance, forecasting EPS of $2.28 versus the consensus of $2.30.
Looking ahead, the analysts are concerned about the possibility of a 2025 EPS rebase, suggesting that PepsiCo may need to lower snack pricing to stimulate demand, which could impact next year's earnings outlook. However, with the stock trading at about 20 times Citi's estimate for 2025 EPS, the analysts believe that some of this risk is already priced in.
In conclusion, while PepsiCo may face challenges in the near term, Citi retains its Buy rating on a longer-term basis. Stay informed and make wise investment decisions based on the latest market insights.
