TLDR
- JPMorgan downgraded PepsiCo to Neutral from Overweight and cut its price target 19% to $138.
- Deutsche Bank also downgraded PepsiCo to Hold from Buy earlier this week, its second cut in days.
- PEP stock slipped about 1% in premarket trading following the JPMorgan call.
- Analysts say PepsiCo’s North America recovery has stalled while transportation and other costs keep rising.
- PepsiCo reports Q3 earnings before the market opens on October 8.
PepsiCo (PEP) stock slipped about 1% in premarket trading after JPMorgan downgraded the company on Monday. The stock last traded near $128.50.
JPMorgan analyst Andrea Teixeira cut her rating on PepsiCo to Neutral from Overweight. She also lowered her price target by 19%, to $138 from $170.
It’s the second downgrade for PepsiCo this week. Deutsche Bank cut its rating to Hold from Buy on Monday and trimmed its target to $138 from $155.
Teixeira said PepsiCo’s North America turnaround has stalled while costs keep climbing. She pointed to weak trends across the company’s salty snacks and foods divisions.
North America Remains the Weak Spot
Frito-Lay North America has tried several fixes this year. These include ingredient reformulation, new packaging, higher marketing spend and lower prices.
Despite the effort, sales growth has stayed weak. Teixeira said the recovery “appears to have stalled” following the first quarter of 2026.
PepsiCo Foods North America has shown some improvement. But Teixeira said that progress looks tied to broader economic conditions rather than anything the company is driving on its own.
International markets have been a bright spot this year. Favorable weather and the FIFA World Cup gave sales a lift.
Teixeira warned those gains won’t repeat. Once the one-off boosts are stripped out, she said North American trends continue to fall short of management’s expectations.
Earnings Estimates Move Lower
JPMorgan cut its 2027 earnings per share estimate to $8.86 from $9.05. The bank also lowered its 2028 estimate to $9.33 from $9.57.
Both figures sit below Wall Street’s consensus of $8.95 and $9.47. Teixeira said PepsiCo will likely lean more on production and cost savings to hit the low end of its 5% to 7% earnings growth guidance.
New transportation costs are adding further pressure heading into the fourth quarter. Teixeira also trimmed her Q3 organic sales growth estimate to 2.8% from 3.2%.
Her Q3 EPS estimate now sits at $2.29, down from $2.31. She cited softer North American consumer trends and weaker track channel data.
Teixeira said PepsiCo’s valuation, around 15 times earnings, is now roughly in line with peers. She added that a re-rating is possible if management shows steady volume gains in FLNA.
Deutsche Bank’s Steve Powers echoed a similar view Monday. He said he has less certainty in PepsiCo’s strategic direction in North America, adding that recent turnaround efforts have produced mixed or short-lived results.
PepsiCo is set to report third quarter results before the market opens on October 8.
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