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Key Takeaways:
- Analysts expect Pepsi to report revenue of $22.3 billion in Q2, down 1% year over year.
- Adjusted earnings are forecast to fall by 11% YoY to $2.03 per share.
- Our valuation model projects PEP stock to gain 21.6% over the next 2.5 years, indicating potential upside despite current headwinds.
In Q1 of 2025, Pepsi (PEP) reported 1% organic revenue growth despite challenging consumer conditions.
Pepsi is forecast to report its Q2 earnings this Thursday. Analysts covering PEP stock expect revenue to decline by 1% year over year to $22.27 billion in the June quarter, while earnings are forecast to drop by 11% to $2.03 per share.
The beverage and snack giant lowered its full-year earnings guidance due to the impacts of tariffs, consumer uncertainty, and continued weakness in its Frito-Lay North America business. However, it maintained its low single-digit revenue growth outlook.
Pepsi has missed revenue estimates in three of the last five quarters, while it has beaten earnings estimates in four of the last five quarters.
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Pepsi’s International Growth Engine Under Focus
Pepsi has demonstrated strategic resilience through portfolio diversification and international expansion, positioning itself for sustained growth despite the headwinds in North America.
PepsiCo’s international business is expected to be a key growth catalyst, as management reported 5% growth in the quarter and anticipates continued mid-single-digit expansion.
The segment’s geographic diversification across Europe, India, and Brazil provides stability, while emerging markets offer long-term upside in per capita consumption compared to mature U.S. markets.
The company’s $60+ billion snack portfolio transformation exemplifies its commitment to evolving consumer preferences toward more permissible and functional offerings.
PepsiCo’s approach to investing in portfolio premiumization through acquisitions, such as Sabra and Siete, combined with natural ingredient transitions, positions it to capture market share in faster-growing snack segments.
PepsiCo’s beverage turnaround opportunity, although currently challenged, aims to achieve margin expansion through operational excellence initiatives. CEO Ramon Laguarta expects continued progress in core brands like Pepsi and Gatorade, which have begun gaining market share through zero-sugar innovations and enhanced go-to-market execution.
Pepsi’s three-pillar strategy for Frito-Lay recovery includes intelligent price-pack architecture investments, portfolio transformation toward healthier options, and operational excellence improvements following SAP implementation challenges that impacted service levels.
With international markets providing consistent mid-single-digit growth and North American businesses positioned for recovery through strategic investments, PepsiCo maintains flexibility to continue gaining market share while navigating near-term consumer pressures.
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Is PEP Stock a Buy Before Its Q2 Earnings?
Our valuation model estimates PepsiCo to increase revenue by 2.2% year over year through 2028, while maintaining an operating margin of 16.1%.
Moreover, the model estimates PEP stock to maintain a forward price-to-earnings multiple of 17x, which is consistent with the current multiple of 17x and in line with its long-term average.
We can see that the valuation model projects PEP stock to gain 21.6% over the next 2.5 years, indicating an annual return of 8.3% (including dividends). This suggests a small potential upside despite current consumer headwinds.
Pepsi stock has underperformed the broader markets in the past decade, delivering dividend-adjusted gains of 87% since July 2015.
Notably, PepsiCo’s diversified geographic footprint, strong international growth momentum, and strategic portfolio transformation initiatives position it well for long-term value creation as consumer conditions normalize and operational improvements materialize.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
