Key Takeaways
- JPMorgan slashed PepsiCo’s rating to Neutral from Overweight, reducing its price target to $138 from $170āa 19% decrease.
- Earlier in the week, Deutsche Bank lowered PepsiCo to Hold from Buy, marking the second downgrade within days.
- Shares of PEP declined approximately 1% during premarket hours after JPMorgan’s announcement.
- Wall Street firms point to a stagnant North American business turnaround and escalating transportation costs.
- The company will unveil Q3 financial results on October 8 before the opening bell.
Shares of PepsiCo (PEP) declined roughly 1% in early premarket activity following a JPMorgan downgrade issued Monday morning. The stock was hovering around $128.50 per share.
JPMorgan’s Andrea Teixeira downgraded the beverage and snack giant to Neutral from Overweight while simultaneously slashing her price target from $170 to $138āa substantial 19% reduction.
The move represents the second analyst downgrade PepsiCo has absorbed this week. Deutsche Bank also reduced its stance to Hold from Buy on Monday, cutting its target price from $155 to $138.
According to Teixeira, the company’s North American turnaround efforts have hit a wall even as operating expenses continue their upward trajectory. She highlighted deteriorating performance across both the salty snacks segment and broader food operations.
Persistent North American Challenges
Throughout the current year, Frito-Lay North America has deployed multiple strategic initiatives. The division has experimented with ingredient changes, refreshed product packaging, boosted advertising expenditures, and implemented price reductions.
Yet these interventions have failed to meaningfully accelerate revenue growth. Teixeira noted that the turnaround momentum “appears to have stalled” after the opening quarter of 2026.
While PepsiCo Foods North America has demonstrated modest signs of stabilization, Teixeira emphasized that these improvements seem more attributable to macroeconomic tailwinds than company-specific initiatives.
The company’s international operations have provided a more encouraging narrative this year. Favorable weather patterns and the FIFA World Cup tournament helped boost overseas sales volumes.
However, Teixeira cautioned that these temporary catalysts won’t persist. After adjusting for these one-time benefits, North American performance continues to underperform management’s projections.
Profit Forecasts Reduced
JPMorgan revised its 2027 earnings per share forecast downward to $8.86 from $9.05. The firm’s 2028 projection also decreased to $9.33 from $9.57.
These revised figures trail the Street’s consensus estimates of $8.95 and $9.47 respectively. Teixeira suggested PepsiCo will need to depend more heavily on manufacturing efficiencies and expense reductions to achieve the lower end of its 5% to 7% earnings growth target range.
Emerging transportation expenses are creating additional headwinds entering the final quarter. Teixeira also adjusted her Q3 organic revenue growth projection to 2.8% from 3.2%.
Her third quarter EPS forecast now stands at $2.29, a decrease from the previous $2.31 estimate. She attributed the reduction to softer North American consumer behavior and disappointing tracked channel performance data.
Teixeira observed that PepsiCo’s current valuation multiple of approximately 15 times earnings now aligns more closely with industry comparables. She suggested a potential valuation expansion could materialize if management demonstrates consistent volume growth momentum in FLNA.
Deutsche Bank analyst Steve Powers shared comparable concerns in his Monday report. He expressed diminished confidence in PepsiCo’s North American strategic roadmap, noting that recent operational improvements have delivered inconsistent or temporary benefits.
PepsiCo will release its third quarter financial performance before market open on October 8.
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
