Pepsico's revenue stagnation over the past few years has been misread. Compare Pepsico to it's peers in the consumer staples sector. They all had peek revenue during the COVID supply chain crisis and they have been contracting ever since.
Pepsico has not been contracting. Revenue isn't stagnant. It's consolidating at a structurally high level. 2026 will be a breakout year.
Pricing on EPS can be misleading.
Take a second look at Pepsico's 2025 financials. The 2025 EPS numbers were weighted down by the nearly $3.3 Billion acquisitions of Poppi and Seite. These were strategic investment in brands with demonstrated massive growth – Poppi, for example, grew 38x between 2020 and 2024. It's a functional beverage brand primed to expand internationally now that it is in the Pepsico portfolio.
I should also mention Celsius Holding which Pepsico owns an 11% stake in. This isn't your typical energy drink brank. Monster and Redbull have a product that skews 70% male. Celsius is split 50-50 between the Male-Female Cohort. Alani Nu (a energy drink in the Celsius portfolio) skews more dramatically female with a 92% female consumer base. Why this matters? Healthcare is the fastest growing segment of the economy. The jobs pay well but typically come with long hours. It's 80% female. Energy drink consumption is high among nurses. This is based on peer-reviewed data. This is a segment of the economy with high discretionary income and it's a segment of the economy that Pepsico is in a good position to serve through Celsius Holdings.
Pepsico at $155 is a dividend aristocrat with 54 years of dividend increases. A 3.6% yield backed by $7.7 Billion in free cash flow trading at a historically cheap multiple in the middle of an investment cycle that will convert from earnings headwind to earnings tailwind over the next year.
PPE currently trades near a five-year valuation low on a forward P/E basis despite a long term average of 24-26x. The company has guided to 90% free cash flow conversion as one-time cost charges roll off. If Pepsico delivers $9 in normalized EPS in 2027, a reasonable estimate once acquisitions drag clears, and re-rates to a conservative 24x forward multiple then you get a $216 price target. That's 39% upside on a conservative growth projection.
Posted by Local_Math_5512