JPMorgan downgrades PepsiCo to Neutral in second cut of the week

Investing.com -- JPMorgan downgraded PepsiCo to Neutral from Overweight and lowered its price target to $138 from $170, the second downgrade for the food and beverage giant this week.

The bank said the company's North American turnaround has stalled while costs are rising.

Analyst Andrea Teixeira told investors in a note that the upcoming quarter may still look decent, helped by strong international sales on favorable weather and the FIFA World Cup.

However, she believes that when excluding those one-off boosts, North American trends have continued to fall short of management's expectations.

"Despite the several interventions including ingredient reformulation and packaging, increased spend and lower prices, FLNA salty snacks performance has been lackluster, in our view, and the recovery appears to have stalled following 1Q26," Teixeira wrote.

The analyst added that PepsiCo will likely have to rely more heavily on cost savings in the fourth quarter to hit the low end of its guidance for 5% to 7% earnings growth. New transportation costs are expected to add to the pressure.

JPMorgan cut its 2027 EPS estimate to $8.86 from $9.05 and its 2028 estimate to $9.33 from $9.57. Both are below the consensus of $8.95 and $9.47.

"As estimates will likely move down from here, we expect investors to wait for expectations to be more realistic given the most recent pressures before becoming more constructive again," Teixeira said.

On Monday, Deutsche Bank downgraded PepsiCo to Hold from Buy and cut its price target to $138 from $155. Analyst Steve Powers said he has "less certainty in PEP's strategic direction in North America." He added that several turnaround initiatives have produced mixed or fleeting benefits.

Original Article

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