Bank of America has revised its earnings estimates for PepsiCo Inc (NASDAQ:PEP, ETR:PEP), reflecting persistent weaknesses in the company’s North American Snacks and Beverages segments, particularly within convenience store channels.
In a note Monday, analysts at Bank of America reduced their FY24 and FY25 earnings estimates, projecting organic revenue growth of just 1% for Q3 2024 and 3.1% for FY25.
The new earnings per share (EPS) estimates are set at $8 and $8.45, respectively, marking a decrease of approximately 1.5% from previous forecasts.
The ongoing sales slump is largely attributed to underperformance in small-format channels, which account for roughly 40% of snack sales and 50% of beverage sales. The analysts view this channel dynamic as cyclical, suggesting potential for a rebound over time.
Bank of America also lowered its price target for PepsiCo to $185 from $190, maintaining a price-to-earnings (P/E) ratio of 22x for its calendar year 2025 estimates.
“If weakness continues it will raise the question for potentially larger actions including restructuring, portfolio review, and/or beverage franchising,” analysts wrote.
“Despite current slump, Pepsi has strong brand franchises; enviable capabilities and route to market with a long international growth runway.
“We also expect, if history holds, the markets are likely to reward remedial actions.”
Currently, PepsiCo is trading at a P/E ratio of 20x for FY25 estimates, which represents a discount relative to historical averages among peers and Coca-Cola Co.
Analysts are maintaining their Buy rating on the stock.