PepsiCo Stock Up 1.3% on Q4 Results: Bullish Signal or Caution Ahead?

PepsiCo Inc. PEP has risen 1.3% since reporting fourth-quarter 2024 results on Feb. 4, 2025. This reflects an outperformance compared with its industry peers, the broader sector and the S&P 500 index. The Zacks Beverages – Soft Drinks industry and the Consumer Staples sector have grown 0.7% and 0.2% in the same period. Meanwhile, the S&P 500 has risen 0.02% since Feb. 4.The stock’s modest growth since its earnings release reflects mixed sentiments among investors following the release. PepsiCo exceeded the Zacks Consensus Estimate for earnings per share (EPS) and revenues in fourth-quarter 2024. However, the top line declined year over year.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Revenues continued to be affected by weak category trends in the North America convenient food business, ongoing recall-related issues at QFNA and business disruptions caused by escalating geopolitical tensions in some international markets. Meanwhile, the company’s bottom line benefited from effective cost controls, driven by incremental investments to improve market competitiveness.The unit volume was down 1% each for the convenient food and beverage businesses. Foreign currency impacted revenues by 2%. While organic revenues grew 2.1% year over year, the company’s consolidated organic volume was down 1% in the fourth quarter. However, effective net pricing improved 3% in the fourth quarter.Is PEP’s Overall Share Performance Just as Impressive?PepsiCo’s shares have experienced volatility over the past year. A closer look at the stock’s one-year performance reveals that it has underperformed the industry in this period. Specifically, the PEP stock has lost 16.4% in the past year compared with the industry’s decline of 9.3% and the sector’s dip of 4.3%. The stock also compared negatively against the S&P 500’s 22.4% rally.PepsiCo’s Price Performance Image Source: Zacks Investment Research PEP shares have underperformed its competitors, including The Coca-Cola Company’s KO 5.9% rally and Keurig Dr Pepper’s KDP decline of 1.5% in the past year. However, PepsiCo has outpaced Monster Beverage’s MNST decline by 18% in the same period.Currently priced at $145.35, the PEP stock trades close to its 52-week low of $141.51. The PepsiCo stock is trading at a 20.8% discount from its 52-week high of $183.41. The stock is trading below its 50-day and 200-day moving averages, indicating a bearish sentiment.PEP Stock Trades Above 50 & 200-Day Moving Averages Image Source: Zacks Investment Research PepsiCo’s Estimate Revision TrendThe Zacks Consensus Estimate for PEP's 2025 and 2026 EPS moved down in the last seven days, indicating negative sentiment among analysts for the company's earnings. Although the company’s outlook looks decent, analysts seem less confident about PepsiCo’s prospects. The Zacks Consensus Estimate for 2025 and 2026 EPS have moved down 0.8% and 1.2%, respectively, in the past 30 days.For 2025, the Zacks Consensus Estimate for PEP’s sales and EPS implies 2.6% and 3.4% year-over-year growth, respectively. The consensus mark for 2026 sales and earnings indicates 3.8% and 6.6% year-over-year increases, respectively. Image Source: Zacks Investment Research Factors Hindering PEP’s Stock PerformancePepsiCo’s downside comes from its soft top-line performance trends, led by headwinds in the QFNA segment and troubles in the North America markets. The company continues to face challenges in its QFNA segment due to product recalls and weak category performance. The QFNA segment, which includes brands like Quaker Oats, has been affected by recalls tied to contamination concerns, such as Salmonella, involving various cereals and snacks. These issues have reduced sales and profits in recent quarters.The North America convenient foods business has experienced weak demand, led by higher prices and product recalls in the QFNA segment. Revenues were impacted by business disruptions from escalating geopolitical tensions in certain international markets. PepsiCo's aggressive price hikes in response to rising inflation over recent years have pressured volumes as consumers adjust their spending amid economic challenges.Does PepsiCo’s Stock Valuation Discount Signals Trouble?PEP is currently trading at a forward 12-month P/E ratio of 16.95X, below the industry average of 17.3X and the S&P 500’s average of 22.25X.Although PepsiCo’s stock valuation is currently lower than that of its industry peers, this gap might not be as advantageous as it appears. The lower price could signal underlying issues rather than presenting a straightforward investment opportunity. At this moment, its current valuation seems unwarranted. PepsiCo has a Value Score of D. Image Source: Zacks Investment Research PEP’s Investment StrategyInvesting in the PepsiCo stock requires a thoughtful strategy, especially given the company’s recent challenges in its North America operations and the broader market environment. Recent market data suggests bleak prospects for near-term recovery in its North America business.Trading at a discounted P/E, below the industry average, PEP may seem to offer a compelling value. However, its muted estimate revision trend and bearish technical indicators call for a cautious approach for new investors. Potential investors should consider waiting for clearer signs of recovery before investing in this Zacks Rank #4 (Sell) stock.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. 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(PEP): Free Stock Analysis Report Monster Beverage Corporation (MNST): Free Stock Analysis Report Keurig Dr Pepper, Inc (KDP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks