Key Points
- JPMorgan lowered PepsiCo’s rating to Neutral from Overweight, slashing the price target by 19% to $138.
- Earlier this week, Deutsche Bank also downgraded the stock to Hold from Buy, marking the second consecutive downgrade.
- Shares of PEP declined approximately 1% in premarket trading after JPMorgan’s announcement.
- Wall Street analysts highlight that PepsiCo’s North American business remains stagnant while operational costs continue to escalate.
- The company is scheduled to release its Q3 financial results on October 8 before market open.
Shares of PepsiCo (PEP) declined roughly 1% during premarket hours on Monday after JPMorgan issued a downgrade. The stock was trading around $128.50.
JPMorgan’s analyst Andrea Teixeira downgraded her stance on PepsiCo from Overweight to Neutral. Simultaneously, she reduced the price target significantlyāby 19%ādropping it from $170 to $138.
This marks the second time PepsiCo has been downgraded within the same week. Deutsche Bank moved its rating from Buy to Hold on Monday, while also adjusting its price target downward from $155 to $138.
According to Teixeira, the company’s North American business recovery has lost momentum even as operational expenses continue to mount. She highlighted persistent weakness in both the salty snacks segment and the broader foods division.
North American Operations Continue to Underperform
Throughout the year, Frito-Lay North America has implemented multiple strategic initiatives. These measures encompass ingredient changes, redesigned packaging, increased advertising investment, and competitive pricing adjustments.
Yet despite these interventions, revenue growth has remained disappointing. Teixeira noted that the recovery momentum “appears to have stalled” after the opening quarter of 2026.
PepsiCo Foods North America has demonstrated modest gains. However, Teixeira suggested these improvements appear more closely linked to macroeconomic factors than to company-specific strategic execution.
The company’s international operations have provided a silver lining this year. Beneficial weather patterns and the FIFA World Cup tournament contributed to stronger sales performance.
Teixeira cautioned that these tailwinds are temporary. After adjusting for these one-time benefits, she emphasized that North American performance continues to lag behind management’s projections.
JPMorgan Reduces Profit Forecasts
JPMorgan revised its 2027 earnings per share projection downward to $8.86 from $9.05. The firm also adjusted its 2028 forecast to $9.33 from the previous $9.57.
These updated estimates fall short of the Street consensus of $8.95 and $9.47, respectively. Teixeira indicated that PepsiCo will probably depend more heavily on operational efficiency and cost reduction initiatives to achieve the lower end of its 5% to 7% earnings growth target.
Additional transportation expenses are creating extra headwinds as the fourth quarter approaches. Teixeira also reduced her third quarter organic revenue growth projection to 2.8% from 3.2%.
Her revised Q3 EPS forecast stands at $2.29, down from the prior $2.31 estimate. She attributed the adjustment to weakening North American consumer patterns and less favorable track channel performance data.
Teixeira observed that PepsiCo’s current valuation of approximately 15 times earnings aligns closely with industry peers. She noted that a valuation improvement could materialize if management demonstrates consistent volume growth in FLNA.
Deutsche Bank analyst Steve Powers shared comparable sentiments on Monday. He expressed reduced confidence in PepsiCo’s North American strategic roadmap, noting that recent turnaround initiatives have yielded inconsistent or temporary outcomes.
The company 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
