PepsiCo: Even At A Lower Multiple, The Upside Is Hard To Ignore
PepsiCo reported 8.5% revenue growth in Q1 2026, driven by pricing, acquisitions, and food volume gains despite inflation pressures. Gross margin declined slightly, but operating profit rose 24.4% on cost optimization and operating leverage. The company maintains 2026 guidance for 2-4% organic growth and 4-6% constant currency EPS growth, with strong free cash flow conversion. The analyst retains a Buy rating, seeing 15-23% upside even with a reduced valuation multiple.
- ▪PepsiCo achieved 8.5% revenue growth in Q1 2026, supported by net pricing, acquisitions, and food volume increases.
- ▪Gross margin decreased 60 basis points to 55.2%, but operating margin expanded to 16.5% due to cost optimization.
- ▪2026 guidance includes 2-4% organic revenue growth, 4-6% constant currency EPS growth, and 80% free cash flow conversion.
- ▪The analyst maintains a Buy rating on PEP, projecting 15-23% upside with an adjusted EV/EBITDA multiple of 14.6x.
- ▪Since the analyst's initial coverage, PEP has risen 5.2%, briefly surpassing the $168.42 price target.
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