Investments Craft PepsiCo's (PEP) Growth Story: Stock to Gain

About this update from Fomento Economico Mexicano Sab De Cv Units Cons. Of 5 Shsb

PepsiCo Inc. PEP has been in a good spot, courtesy of strength and resilience in its categories, diversified portfolio, modernized supply chain, improved digital capabilities, flexible go-to-market distribution systems and robust consumer demand trends, which have been aiding its performance. Robust performances of the global beverage and convenient food businesses have been the key to the company’s growth story. Productivity and cost-saving plans also bode well.PepsiCo continued its robust top and bottom-line surprise trend for the seventh consecutive quarter in third-quarter 2023. Sales and earnings also improved year over year. On an organic basis, revenues grew 8.8% year over year, driven by broad-based growth across categories and geographies.PEP’s core constant-currency earnings improved 16% from the year-ago period, backed by strong top-line growth, as well as the mitigation of inflationary pressures through cost-management and revenue-management initiatives. The strong top line resulted from a robust price/mix in the reported quarter. Unit volume declined 1.5% year over year for the convenient food business and was flat year over year for the beverage business.The Zacks Consensus Estimate for PEP’s current financial-year sales and earnings suggests growth of 6.4% and 11.2%, respectively, from the year-ago reported numbers.However, PepsiCo has been witnessing cost pressures from the impacts of supply-chain disruptions; and inflationary labor, transportation and commodity costs. Adverse currency rates also act as headwinds.Shares of the Zacks Rank #2 (Buy) company have lost 8% in the past six months against the industry’s 1.4% growth. The stock also compared favorably with the Consumer Staples sector’s decline of 4.5%. What’s Working Well for PEP?PepsiCo has been benefiting from continued investments in its brands, go-to-market systems, supply chains, manufacturing capacity and digital capabilities to build competitive advantages. Accelerated growth in the global beverage and convenient food businesses positions the company for improvement in the near term. This reflects the strength in its diversified portfolio.The company has been a key beneficiary of its presence in the snacking and food category, along with its beverage profile. On a year-over-year basis, organic revenues grew 8% for the global beverage business and 9% for the convenient food bu...

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