PepsiCo Dips on Weak Demand Despite Profit Improvement: 3 Things Investors Need to See

PepsiCo (PEP) reported second-quarter earnings that came in above analyst expectations on the bottom line this morning. Yet, the stock is down slightly as the continued downward trajectory for demand paints a concerning picture.

Income of $3 billion was a 12% improvement year over year, and this worked out to an adjusted $2.28 per share. Analysts were expecting just $2.16 per share.?

The profitability improvements are a sign that the company’s efforts to become more efficient are paying off. It’s been working to reduce waste and leverage automation in its manufacturing plants.

Revenue was relatively flat for the quarter at $22.5 billion, just below the analyst outlook for $22.59 billion. Global sales in particular were down 3% in the quarter, representing the company’s eighth quarter in a row reporting trailing figures.?

The company did say that some decrease in volume was to be expected as it made strategic moves to shrink package sizes.?

But, there’s no getting around the fact that customers here in the US are not buying as many snacks - and when they do, they’re sticking with store brands amidst PepsiCo’s continued price increases.?

The company has struggled to keep up with its own rising costs, passing those onto the customer who has not been the most receptive thus far. Q4 in 2023 was the eighth consecutive quarter in which the company raised prices. It raised them another 5% just in the most recent quarter from April-June as well.

This disappointing demand trend has forced PepsiCo to revisit its full-year forecast - while it was previously expecting “at least” 4% organic growth, it’ll now be satisfied by managing to even hit that figure.

The stock itself has tumbled more than 6% over the past three months and is down 13% since this time last year. So, where does that leave PEP investors? We’ve taken a closer look through the VectorVest stock software and found 3 things you need to see.

PEP Has Fair Upside Potential, Safety, and Timing

VectorVest simplifies your trading strategy by delivering clear, actionable insights in just 3 ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).

Each sits on a scale of 0.00-2.00 with 1.00 being the average, allowing you to quickly and easily analyze opportunities and make calculated investment decisions. You’re even given a buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating.?

As for PEP, it’s not time to sound the alarm quite yet. Here’s what we uncovered:

• Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It’s a much better indicator than the typical comparison of price to value alone. PEP has a RV rating of 1.07.
• Fair Safety: The RS rating is a risk indicator computed from a deep analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. PEP has a fair RS rating of 0.99, just below the average.
• Fair Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. PEP has a fair RT rating of 0.89.

The overall VST rating of 0.97 is just below the average and deemed fair. PEP is currently rated a HOLD in the VectorVest system.?

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Use VectorVest to Analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

VectorVest advocates buying safe, undervalued stocks, rising in price. PEP released its Q2 results that featured profitability improvements, but the price hikes that made it possible are resulting in slowed sales. The stock itself has fair upside potential, safety, and timing.?

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action.

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