PepsiCo recently reported its Q1 results, with revenues and earnings exceeding expectations. The company reported revenue of $18.3 billion and adjusted earnings of $1.61 per share, outperforming estimates. Despite facing lower volume, PepsiCo’s pricing increased slightly. The company’s stock price is currently around $180, which is considered appropriate based on its recent performance. In this article, we will examine PepsiCo’s stock performance, key takeaways from its Q1 results, and its valuation.
Over the past three years, PepsiCo’s stock has seen a 15% increase, from $150 in early 2021 to around $175 now. This growth has been inconsistent, with returns of 17% in 2021, 4% in 2022, and -6% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. PepsiCo has struggled to outperform the S&P during this time, as have other consumer staples and tech giants. However, the Trefis High Quality Portfolio, consisting of 30 stocks, consistently outperformed the S&P 500 over the same period.
Given the current macroeconomic environment with high oil prices and elevated interest rates, there is uncertainty about PepsiCo’s future performance. The company’s stock is currently trading at around $178, close to Trefis’ estimated valuation of $186 per share. This valuation is based on a P/E multiple of 23x for PepsiCo and expected earnings of $8.15 per share for 2024. PepsiCo’s Q1 revenue of $18.25 billion reflected a 3% organic growth driven by a 5% increase in pricing, offsetting a 2% decline in volume. All segments except Quaker Foods saw sales rise in Q1.
PepsiCo expects its revenue to increase by at least 4% on an organic basis and a minimum of an 8% rise in adjusted earnings on a constant currency basis. Although the company posted a solid Q1, the impact of the Quaker Foods recall weighed on overall performance. Challenges in the macroeconomic environment and higher pricing for PepsiCo’s products may affect demand in the near term. Overall, PepsiCo’s Q1 results were positive, with revenue and earnings exceeding expectations. The company’s stock performance has been inconsistent but is currently appropriately priced based on its recent performance.
