What To Expect From PepsiCo’s Q2?

PepsiCo (NYSE: PEP) will report its Q2 2023 results on Thursday, July 13. We expect PepsiCo
PEP
to report revenue and earnings slightly above the consensus estimates. Continued pricing gains will likely drive the company’s top-line growth, while volume growth may remain tepid, a trend seen in the recent past. Also, our forecast indicates that PEP stock is fully valued, as discussed below. Our interactive dashboard analysis of PepsiCo Earnings Preview has additional details.

(1) Revenues growth to be driven by pricing gains

• Trefis estimates PepsiCo’s Q2 2023 revenues to be around $21.8 billion, reflecting a high single-digit y-o-y growth, slightly above the consensus estimate of $21.7 billion.
• The company should continue to benefit from better price realizations, although volume growth may remain tepid.
• Looking at Q1 2023, the company saw its sales rise 10% y-o-y to $17.8 billion. On an organic basis, sales were up 14%, led by a 16% contribution from pricing gains, while volume was down 2%.
• Our PepsiCo Revenues dashboard details the company’s top-line trajectory and provides details on segments.

(2) EPS likely to be slightly above the consensus estimates

• PepsiCo’s Q2 2023 adjusted earnings per share is expected to be $1.98 per Trefis analysis, slightly above the consensus estimate of $1.95.
• The company’s adjusted net income of $2.1 billion in Q1 2023 reflected a 15% rise from its $1.8 billion figure in the prior-year quarter. This can be attributed to sales growth and operating margin expansion.
• The company’s core operating margins expanded by 93 bps y-o-y in Q1.
• Our dashboard on PepsiCo’s Operating Income has more details.
• For the full-year 2023, we expect the adjusted EPS to be higher at $7.34, compared to the $6.79 figure in 2022.

(3) PEP stock looks like it is fully valued

• We estimate PepsiCo’s Valuation to be around $192 per share, 4% above the current market price.
• This represents a forward P/E multiple of 26x for the company based on our 2023 EPS forecast of $7.34 and compares with the last three-year average of 25x.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

While PEP stock looks fully valued, it is helpful to see how PepsiCo’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for PepsiCo vs. Corning.

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