The upcoming earnings season stirs excitement among investors, with major banks preparing to reveal their results shortly. However, before the banking reports flood in, all eyes are on PepsiCo (PEP), a leading player in the consumer staples industry, set to announce its quarterly performance on Tuesday, October 8th before the market opens.
Let’s delve deeper into the expectations surrounding this consumer staples giant.
Performance Expectations for PepsiCo
PEP shares have experienced a lackluster year in 2024, showing a meager 1.2% increase and predominantly moving sideways throughout. It’s notable that investors have been decreasing their exposure to Consumer Staples stocks this year, favoring the exuberant Technology sector.
Analysts have tempered their earnings predictions for the upcoming quarter in recent months. The Zacks Consensus EPS estimate stands at $2.30, reflecting a 2% decline since mid-July but still indicating a 2.2% growth compared to the same period last year.
Revenue projections have followed a similar trajectory, with an anticipated $23.9 billion, down 1% within the same timeframe, yet up 1.9% from the previous year. It’s crucial to observe the deceleration in the company’s revenue growth, as depicted in the chart below.
Despite the lackluster performance, PEP shares are not commanding a premium valuation historically. The current forward 12-month earnings multiple of 19.6X is notably lower than the five-year median of 23.6X and the five-year highs of 27.8X, confirming investors’ tempered growth outlook.
Investment Decision: To Buy or Not to Buy?
The outlook leading up to PepsiCo’s quarterly announcement leans towards caution, with analysts adjusting their earnings and revenue forecasts downward. While PEP shares have underperformed throughout 2024, a positive guidance could inject vitality into the stock.
This scenario calls for a ‘wait-and-see’ approach, especially given the downward revisions. Given its defensive nature, PEP shares are unlikely to experience a significant downturn if results fall short of expectations.